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CURRO HOLDINGS LIMITED - Reviewed provisional results for the year ended 31 December 2014

Release Date: 17/02/2015 07:05
Code(s): COH     PDF:  
Wrap Text
Reviewed provisional results for the year ended 31 December 2014

Curro Holdings Ltd 
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")

Reviewed Provisional RESULTS
For the year ended 31 December 2014

Learners
up 37%
to 28 737

Revenue
up 52%
to R1 bn

EBITDA
up 68%
to R192m

Cash generated
up 133%
to R247m

HEPS
up 38%
to 17.7cents

Condensed consolidated statement of comprehensive income

                                                                  Reviewed           Audited
                                                Percentage     31 Dec 2014       31 Dec 2013
                                                  increase       R million         R million
Revenue                                                52%           1 001               659
Operating expenses                                     48%           (809)             (545)
Earnings before interest, taxation,
depreciation and amortisation (EBITDA)                 68%             192               114
– Schools                                              69%             262               155
– Head office                                          71%            (70)              (41)
Depreciation and amortisation                          57%            (58)              (37)
Earnings before interest and taxation (EBIT)           74%             134                77
Investment income                                     200%              12                 4
Impairment                                                             (1)                 –
Share of profits of associates                                           1                 1
Finance costs                                         158%            (67)              (26)
Profit before taxation                                 41%              79                56
Taxation                                               75%            (28)              (16)
Profit for the year (PAT)                              28%              51                40
Other comprehensive income
Net fair value loss on cash flow hedge                                 (3)               (1)
Total comprehensive income                             23%              48                39
Profit attributable to:
Owners of the parent                                   48%              55                37
Non-controlling interest                                               (4)                 3
                                                       27%              51                40
Total comprehensive income attributable to:
Owners of the parent                                   41%              52                37
Non-controlling interest                                               (4)                 3
                                                       20%              48                40
Reconciliation of headline earnings
Earnings attributable to owners of the parent          48%              55                37
Adjusted for:
Loss on impairment (after taxation)                                      1                 –
Headline earnings                                      51%              56                37
EBITDA margin                                                          19%               17%
EBITDA margin for schools                                              26%               25%
Earnings per share (cents)
– Basic                                                36%            17,5             12,9*
– Diluted                                              35%            17,2             12,8*
Headline earnings per share (cents) (HEPS)
– Basic                                                38%            17,7             12,8*
– Diluted                                              37%            17,4             12,7*
Number of shares in issue (millions)
– Basic                                                              325,6            294,8*
– Diluted                                                            330,1            300,6*
Weighted average number of shares in issue
(millions)
– Basic                                                              314,4            287,8*
– Diluted                                                            319,0            290,2*

Notes:

* Earnings per share and headline earnings per share for the comparative period have been adjusted
  downwards by 0,3 cents compared to the audited annual financial statements for the year ended
  31 December 2013. This is due to the retrospective adjustment of the 2014 rights offer undertaken.
  The adjustment to basic and diluted weighted average number of shares in issue is an increase of
  6,6 million shares due to the bonus element contained within the rights offer.

Condensed consolidated statement of cash flows

                                                                   Reviewed          Audited
                                                Percentage      31 Dec 2014      31 Dec 2013
                                                  increase        R million        R million
Net cash generated from operating activities          133%              247              106
Net cash utilised in investing activities              16%          (1 257)          (1 087)
Net cash from financing activities                      2%            1 126            1 106
Cash and cash equivalents movement
for the year                                                            116              125
Cash and cash equivalents at the
beginning of the year                                                    79             (46)
Cash and cash equivalents at the end of
the year                                                                195               79

Condensed consolidated statement of financial position

                                                               Reviewed              Audited
                                                            31 Dec 2014          31 Dec 2013
                                                              R million            R million   
ASSETS                                                                                         
Non-current assets                                                3 813                2 515   
Property, plant and equipment                                     3 338                2 131   
Goodwill                                                            338                  272   
Intangible assets                                                   121                   97   
Investment in associate                                               9                   13   
Other loans                                                           7                    2   
Current assets                                                      259                  118   
Inventories                                                          17                    7   
Current tax receivable                                                3                    2   
Loans to associates                                                   6                    –   
Trade and other receivables                                          38                   30   
Cash and cash equivalents                                           195                   79   
Total assets                                                      4 072                2 633   
EQUITY AND LIABILITIES                                                                         
EQUITY                                                                                         
Equity attributable to equity holders of parent                   2 212                1 560   
Share capital                                                     2 092                1 501   
Reserves                                                              9                    7   
Retained income                                                     111                   52   
Non-controlling interest                                            (1)                    3   
Total equity                                                      2 211                1 563   
LIABILITIES                                                                                    
Non-current liabilities                                           1 561                  874   
Loans and other financial liabilities                             1 395                  755   
Deferred tax                                                        166                  119   
Current liabilities                                                 300                  196   
Loans and other financial liabilities                                23                   70   
Current tax payable                                                   2                    1   
Trade and other payables                                            122                   49   
Prepaid school fees and deposits                                    114                   61   
Acquisition payables                                                 39                   15   
Total liabilities                                                 1 861                1 070   
Total equity and liabilities                                      4 072                2 633   
Net asset value per share (cents)                                 679,1                530,2   

Condensed consolidated statement of changes in equity
                                      
                                                               Reviewed              Audited
                                                            31 Dec 2014          31 Dec 2013
                                                              R million            R million   
Balance at the beginning of the year                              1 563                  862   
Total comprehensive income                                           48                   39   
Issue of shares                                                     600                  666   
Share issue costs                                                   (8)                  (9)   
Recognition of share-based payments                                   8                    5   
Balance at the end of the year                                    2 211                1 563   

Condensed consolidated segmental report (Restated)

                                                                    Reviewed         Audited
                                                  Percentage     31 Dec 2014     31 Dec 2013
                                                   increase        R million       R million
Revenue                                                 52%            1 001             659
– Curro                                                 49%              817             550
– Meridian                                              68%              184             109
School EBITDA                                           69%              262             155
– Curro                                                 82%              219             120
– Meridian                                              24%               43              35
Property, plant and equipment                           57%            3 338           2 132
– Curro                                                 59%            2 864           1 798
– Meridian                                              42%              474             334
Loans and other financial liabilities                   72%            1 419             825
– Curro                                                 80%              897             499
– Meridian                                              60%              522             326

Notes to the financial statements

1. Statement of compliance

   The condensed consolidated financial information for the year ended 31 December 2014 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, and to
   also, as a minimum, contain the information required by IAS 34: Interim Financial Reporting, the Listings 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 respects with those applied in
   the financial statements for the year ended 31 December 2013. The reviewed condensed consolidated results have
   been prepared by DN Hartshorne, CA(SA) and supervised by the Chief Financial Officer, B van der Linde, CA(SA) CFA.

2. Review conclusion

   The condensed consolidated financial information for the year ended 31 December 2014 has been independently
   reviewed by the Group's auditor, Deloitte & Touche. The review was conducted in accordance with ISRE 2410 "Review
   of Interim Financial Information performed by the Independent Auditor of the Entity". A copy of their unmodified review
   conclusion is available for inspection at the Company's registered office. Any reference to future financial performance
   included in this announcement, has not been reviewed or reported on by the Company's auditors.

   The auditor's report does not necessarily cover all of the information contained in this announcement/financial report.
   Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's work they
   should obtain a copy of that report together with the accompanying financial information from the registered office of
   the Company. The directors take full responsibility for the preparation of the report and that the financial information
   was accurately extracted from the underlying annual financial statements.

3. Accounting policies

   The accounting policies adopted in the preparation of the condensed consolidated financial information are consistent
   with those of the annual financial statements for the year ended 31 December 2013. For a full list of standards and
   interpretations which have been adopted, we refer you to our 31 December 2013 annual financial statements.

4. Shared capital

   Effective 23 June 2014, 29.5 million shares were issued by way of an underwritten renounceable rights offer at a
   subscription of R20.00 per rights offer share, in the ratio of 1 rights offer share for every 10 Curro ordinary shares.
   On 9 October 2014, 1.3 million shares were issued to employees through the Curro share incentive scheme.

5. Events after the reporting period

   Effective 1 January 2015 the Company acquired the business operations and properties of St Dominics Academy
   (Newcastle), for a consideration of R10 million. No other events have been identified.

Other key ratios

                                       Unreviewed   Unreviewed   Unreviewed   Unreviewed
                                           31 Dec       31 Dec       31 Dec       31 Jan
                                             2012         2013         2014         2015
Number of schools                              22           26           32           42
Number of learners                         12 473       21 027       28 737       36 021
Median number of learners per school          567          759          898          858
Staff                                       1 630        2 387        3 128        3 211
Teachers                                    1 151        1 593        1 905        1 949
Learner/Teacher ratio                          11           14           15           18
Building size (m(2))                      169 024      261 004      392 314      392 314
Land size (ha)                                153          188          298          298
Capital investment (Rm)                       782        1 076        1 305
– Current campuses                            223          602          651
– New campuses                                237          242          482
– Acquisitions                                322          232          172

The tables below illustrate the J-Curve effect from newly established schools to more mature schools:

For the year ended 31 December 2013 (Unreviewed)

% of eventual           Number        Number              EBITDA
capacity            of schools   of learners   EBITDA*    margin
0 – 25                       7         2 668       (3)      (4%)
25 – 50                      6         4 017        24       21%
50 – 75                      8         6 119        43       21%
75 – 100                     5         8 223        90       38%
                            26        21 027       155       25%

For the year ended 31 December 2014 (Unreviewed)

% of eventual           Number        Number              EBITDA
capacity            of schools   of learners   EBITDA*    margin
0 – 25                       7         1 780       (5)      (9%)
25 – 50                      6         4 444        20       18%
50 – 75                     10         9 096        93       27%
75 – 100                     9        13 417       154       32%
                            32        28 737       262       26%

The tables below illustrate the profitability of acquired and developed schools:

For the year ended 31 December 2013 (Unreviewed)

                        Number        Number              EBITDA
                    of schools   of learners   EBITDA*    margin
Acquired                    10        10 300       103       35%
Developed                   16        10 727        52       16%
                            26        21 027       155       25%

For the year ended 31 December 2014 (Unreviewed)

                        Number        Number              EBITDA
                    of schools   of learners   EBITDA*    margin
 Acquired                   12        14 422       152       30%
 Developed                  20        14 315       110       23%
                            32        28 737       262       26%
Notes:
*  EBITDA at school level (excluding net head office costs).

Commentary

Curro Holdings Ltd ("Curro" or "the Company" or "the Group") opened in January 2015 with 42 campuses and the board is
pleased to announce that Curro has achieved its prelisting objective of at least 40 campuses, five years ahead of its original
target of 2020. Curro has grown by an additional 8 758 learners to 36 021 learners since January 2014. 

The Group, through its business models (details found on our website: www.curro.co.za), caters for learners from
three months old to Grade 12. Curro also has a training institute focused on educator training at a tertiary level.

Academic results

                                                     IEB                    NSC             
                                                 2014      2013          2014      2013   
Number of learners                                637       380           488       632   
Pass rate                                         99%      100%           90%       92%   
University exemption                              82%       79%           43%       56%   
Average number of A's per learner                1.12       1.1           0.7       0.6   
Average                                           65%       65%           56%       56%   
Average > 60%                                     66%       68%           29%       49%   
Maths (learners taken and average achieved)   50%/65%   56%/62%   52%/45%   4   49%/48%   

Financial results

Revenue increased by 52% from R659 million to R1 billion. As a result of operational gearing, EBITDA increased by
68% from R114 million to R192 million. The EBITDA margin increased from 17% to 19%. The cash generating ability of the
business was proven by the increase in net cash generated from operating activities which increased by 133% from
R106 million to R247 million.

Net interest expense has increased by 150% from R22 million to R55 million. The interest consolidated from Meridian
business represents R37 million (2013: R14 million) thereof.

Headline earnings increased by 51% from R37 million to R56 million. Headline earnings per share increased by 38% from
12.8 cents to 17.7 cents.

Investment and expansion

During the 2014 year, the group invested approximately R1.3 billion on the following projects:
-  Four new Curro schools built at Brackenfell (Western Cape), Secunda (Gauteng), Monaghan Farm (Lanseria) and Kathu
   (Northern Cape);
-  Two new Meridian schools built at Cosmo City (Johannesburg) and Newcastle (KZN);
-  Two new Curro Academy schools built at Mahikeng (North West) and Soshanguve (Pretoria North);
-  Acquired Waterstone College (Johannesburg South), effective 1 June 2014, for a purchase consideration of
   R130 million with R58 million goodwill recognised and acquired Grantleigh (Northern KZN), effective 1 January 2014, for a
   purchase consideration of R30 million with no goodwill recognised. Acquisitions were done at fair value;
-  Completed the land banking of seven sites to a value of approximately R100 million; and
-  Invested approximately R650 million on improvement and expansion at existing campuses.

In 2015 Curro plans to
-  Invest approximately R600 million on the expansion of existing campuses;
-  Develop three new Curro schools at Waterfall estate (Johannesburg), Sitari (Somerset West) and Hillcrest (Durban)
-  Develop a new site for the Meridian Pretoria school and expand the Cosmo City campus;
-  Develop three new Curro Castles in the Johannesburg Area;
-  Invest R250 million in land banking of various key sites; and
-  Investigate potential acquisitions.

Balance sheet and funding

In 2014 Curro raised R500 million in long-term funding, drew down on R210 million on facilities at Meridian and raised equity
of R600 million through a rights offer.

As part of the Group funding and growth plan, Curro plans to raise R740 million through a  fully underwritten rights offer. In terms of the rights
offer, shareholders will receive, for every 11 shares held, the right to acquire one additional share at R25 per share. This
represents a 23% discount to the 30day VWAP as at 16 February 2015. The rights offer will take place during April 2015 and information on the
rights offer will be communicated in due course. Curro also plans to raise up to R700 million in the debt markets.

Dividend

No dividends have been declared for the period under review.

Prospects

Curro remains on track to achieve its target of 80 schools by 2020.

On behalf of the board

SL Botha                      CR van der Merwe
Chairperson                   Chief Executive Officer

17 February 2015

Directors: SL Botha** (Chairperson), ZL Combi**, AJF Greyling (COO), HG Louw (CIO), PJ Mouton*, SWF Muthwa**,
B Petersen**, B van der Linde (CFO), CR van der Merwe (CEO),

* Non-executive       ** Independent non-executive

Registered office: 38 Oxford Street, Durbanville, 7550

Transfer secretaries: Computershare Investor Services (Pty) Ltd
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

Creating future leaders through world class education



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