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CURRO HOLDINGS LIMITED - Unaudited interim results for the six months ended 30 June 2015

Release Date: 13/08/2015 08:00
Code(s): COH     PDF:  
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Unaudited interim results for the six months ended 30 June 2015

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 2015

Headline Earnings
Up 82%
from R28 m
to R51 m

EBITDA
Up 69%
from R97 m
to R164 m

HEPS
Up 68%
from 8.8 cents
to 14.8 cents

Revenue
Up 45%
from R487 m
to R705 m

Learners
Up 26%
from 28 737
to 36 085

Condensed consolidated statement of comprehensive income

                                                Unaudited    Unaudited      Audited
                                              30 Jun 2015  30 Jun 2014  31 Dec 2014
                                Percentage       6 months     6 months    12 months
                                    change      R million    R million    R million
Revenue                                45%            705          487        1 001
Operating expenses                     39%          (541)        (390)        (809)
Earnings before interest,
taxation, depreciation and
amortisation (EBITDA)                  69%            164           97          192
 Schools EBITDA                        46%            204          140          262
 Head office EBITDA                   (7%)           (40)         (43)         (70)
Depreciation and amortisation          51%           (42)         (28)         (58)
Earnings before interest and
taxation (EBIT)                        77%            122           69          134
Investment revenue                    175%             11            4           12
Impairment                                              –            –          (1)
Share of profits (loss) of
associates                                             –*          (1)            1
Finance costs                          94%           (66)         (34)         (67)
Profit before taxation                 76%             67           38           79
Taxation                               90%           (19)         (10)         (28)
Profit for the period (PAT)            71%             48           28           51
Other comprehensive
income:
Net fair value profit (loss) on
cash flow hedges                                        5           –*          (3)
Total comprehensive income             89%             53           28           48


Profit attributable to:
Owners of the parent                   82%             51           28           55
Non-controlling interest                              (3)           –*          (4)
                                       71%             48           28           51
Total comprehensive income
attributable to:
Owners of the parent                  100%             56           28           52
Non-controlling interest                              (3)           –*          (4)
                                       89%             53           28           48
Reconciliation of headline
earnings:
Earnings attributable to owners
of the parent                          82%             51           28           55
Adjusted for:
Profit (loss) on disposal of
property, plant and equipment                          –*            –           –*
Loss on impairment                                      –            –            1
Headline earnings                      82%             51           28           56


EBITDA margin                                         23%          20%          19%
EBITDA margin for schools                             29%          29%          26%


Earnings per share (EPS)
(cents)***
 Basic                                 68%           14.8        8.8**       17.0**
 Diluted                               67%           14.5        8.7**       16.8**
Headline earnings per share
(HEPS) (cents)***
 Basic                                 68%           14.8        8.8**       17.2**
 Diluted                               67%           14.5        8.7**       16.8**
Number of shares in issue
(millions)
 Basic                                              355.2        324.3        325.6
 Diluted                                            360.7        327.4        330.1
Weighted average number
of shares in issue (millions)
 Basic                                              342.1      311.6**      322.5**
 Diluted                                            347.6      314.7**      327.1**

Notes:
*    Balances less than R500 000 are displayed as R Nil in million rounding.
   
**   Earnings per share and headline earnings per share for the comparative
     periods have been adjusted downwards by 0.2 cents for the six months ended
     30 June 2014 and 0.5 cents for the year ended 31 December 2014 respectively.
     This is due to the retrospective adjustment of the 2015 rights offer undertaken.
     The adjustment to basic and diluted weighted average number of shares in
     issue is an increase of 7.8 million shares for the six months ended 30 June 2014
     and an increase of 8.1 million shares for the year ended 31 December 2014
     respectively due to the bonus element contained within the rights offer.

***  EPS and HEPS are calculated on the actual Rand value of amounts disclosed
     in the Condensed consolidated statement of comprehensive income and not
     on the Rmillion rounding.

Condensed consolidated statement of financial position

                                         Unaudited    Unaudited      Audited
                                       30 Jun 2015  30 Jun 2014  31 Dec 2014
                                          6 months     6 months    12 months
                                         R million    R million    R million
ASSETS
Non-current assets                           4 052        2 917        3 813
Property, plant and equipment                3 568        2 454        3 338
Goodwill                                       338          331          338
Intangible assets                              128          118          121
Investment in associate                          9           12            9
Other financial assets                           9            2            7


Current assets                                 868          523          259
Inventories                                      5            3           17
Current tax receivable                           4            3            3
Loan to associate                                3            –            6
Trade and other receivables                     54           28           38
Cash and cash equivalents                      802          489          195

Total assets                                 4 920        3 440        4 072


EQUITY AND LIABILITIES
EQUITY
Equity attributable to equity holders
of parent                                    3 003        2 174        2 212
Share capital                                2 819        2 084        2 092
Reserves                                        23           10            9
Retained income                                161           80          111
Non-controlling interest                       (4)          3           (1)
Total equity                                 2 999        2 177        2 211


LIABILITIES
Non-current liabilities                      1 670        1 049        1 561
Loans and other financial liabilities        1 492          900        1 395
Deferred tax                                   178          149          166


Current liabilities                            251          214          300
Loans and other financial liabilities           30           20           23
Current tax payable                              5            3            2
Trade and other payables                        91           68          122
Prepaid school fees and deposits               119           84          114
Acquisition payables                             6           39           39

Total liabilities                            1 921        1 263        1 861

Total equity and liabilities                 4 920        3 440        4 072


Net asset value per share (cents)            845.4        670.1        679.1

Condensed consolidated statement of cash flows

                                              Unaudited     Unaudited      Audited
                                            30 Jun 2015   30 Jun 2014  31 Dec 2014
                                Percentage     6 months      6 months    12 months
                                    change    R million     R million    R million
Net cash generated from
operating activities                 (44%)           79            87          247
Net cash utilised in investing
activities                           (20%)        (262)         (327)      (1 257)
Net cash from financing
activities                             26%          790           650        1 126
Cash and cash equivalents
movement for the period                48%          607           410          116
Cash and cash equivalents
at the beginning of the
period                                147%          195            79           79
Cash and cash equivalents
at the end of the period               64%          802           489          195

Condensed consolidated statement of changes in equity
 
                                              Unaudited     Unaudited      Audited
                                            30 Jun 2015   30 Jun 2014  31 Dec 2014
                                               6 months      6 months    12 months
                                              R million     R million    R million
Balance at the beginning of the       
period                                            2 211         1 563        1 563
Total comprehensive income                           53            28           48
Issue of shares                                     740           591          600
Share issue costs                                  (14)           (8)          (8)
Deferred tax asset recognised through       
equity                                                4             –            –
Recognition of share-based payments                   5             3            8
Balance at the end of the period                  2 999         2 177        2 211

Condensed consolidated segmental report (Restated)
 
                                              Unaudited     Unaudited      Audited
                                            30 Jun 2015   30 Jun 2014  31 Dec 2014
                              Percentage       6 months      6 months    12 months
                                  change      R million     R million    R million
Revenue                              45%            705           487        1 001
  Curro                              49%            584           392          817
  Meridian                           27%            121            95          184
Schools EBITDA                       46%            204           140          262
  Curro                              51%            174           115          219
  Meridian                           20%             30            25           43
Property, plant and equipment        45%          3 568         2 454        3 338
  Curro                              48%          3 083         2 084        2 864
  Meridian                           31%            485           370          474
Loans and other financial       
liabilities                          65%          1 522           920        1 418
  Curro                              88%            973           518          897
  Meridian                           37%            549           402          521
 
Notes to the financial statements

1. Statement of compliance
   The condensed consolidated interim financial information for the six months ended
   30 June 2015 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 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 annual financial
   statements for the year ended 31 December 2014. The unaudited condensed
   consolidated interim results have been prepared by DN Hartshorne, CA(SA) and
   supervised by the Chief Financial Officer, B van der Linde, CA(SA), CFA.

2. 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 2014. For a full list of standards and interpretations
   which have been adopted, we refer you to our 31 December 2014 annual financial
   statements.

3. Issued capital
   Effective 8 May 2015, 29.6 million shares were issued by way of an underwritten
   renounceable rights offer at a subscription price of R25.00 per rights offer share
   and a ratio of 1 rights offer share for every 11 Curro ordinary shares held.

4. Business combinations
   Effective 1 January 2015, Curro acquired the business operations and properties
   of St Dominic's Academy. The business liabilities as at 1 January 2015 were
   taken over as purchase consideration.

5. Events after the reporting period
   There were no significant events after the reporting period.

Other key information/ratios

                            31 Dec 2012   31 Dec 2013   31 Dec 2014   30 Jun 2015
Number of campuses                   22            26           33*            42
Number of schools                    61            72            80           101
Number of learners               12 473        21 908        28 737        36 085
Average number of learners
per campus                          567           843           871           859
Number of staff                   1 630         2 387         3 128         3 917
Number of educators               1 151         1 593         1 905         2 462
Learner/educator ratio               11            14            15            15
Building size (m2)              169 024       261 004       392 314       415 979
Land size (ha)                      153           188           298           355
Capital investment (Rm)             782         1 076         1 305           262
– Current campuses                  223           602           651           228
– New campuses                      237           242           482            34
– Acquisitions                      322           232           172             –

Note: *Restated from 32 as disclosed in 2014 results.

The table below illustrates the J-Curve effect from newly established schools to more
mature schools by age (first year of opening).

                                                                        Schools        Schools              Schools   Schools
                                                                         EBITDA         EBITDA               EBITDA    EBITDA
                                        Learner numbers             (R million)    (R million)               margin    margin
                          Number of    30 Jun        30 Jun              30 Jun         30 Jun               30 Jun    30 Jun
First year in operation    campuses      2014          2015  Growth        2014           2015     Growth      2014      2015
2009 and before                  15    17 387        18 064      4%          96            132        38%       32%       34%
2010                              2     1 999         2 131      7%           9             12        34%       26%       29%
2011                              6     3 720         4 382     18%          14             20        46%       22%       23%
2012                              2     1 351         1 599     18%           4              8        68%       19%       23%
2013                              4     3 643         4 918     35%          20             33        68%       35%       37%
2014                              4       799         1 267     59%         (3)              1         Na     (27%)        5%
30 June 2014                     33    28 899        32 361     12%         140            206        47%       29%       31%
Acquired                          1                     600                                  3                            23%
2015                              8                   3 124                                (5)                          (14)%
30 June 2015                     42    28 899        36 085     25%         140            204        46%       29%       29%

Commentary

Introduction
As at 30 June 2015, Curro had 36 085 learners, up 26% from 28 737 learners a
year earlier.

There are now 42 (2014: 33) campuses or 101 (2014: 80) schools across the Group.
A school consist of either a pre-primary school, primary school or high school whilst a campus
consists of a teaching location regardless of the number of schools. The majority of
Curro's campuses comprise of three schools.

Developments
In 2015 Curro aims to:

-  Develop eight new schools (six campuses) to the value of R400 million. The
   campuses are Curro Schools at Sitari Fields (Somerset West – Western Cape),
   Waterfall Estate (Midrand – Gauteng), Hillcrest High School (Durban – KwaZulu-
   Natal). Curro Castles will be constructed at Douglasdale (Johannesburg) and
   Bryanston (Johannesburg). The construction of a new campus for the Embury
   Institute for Teacher Education will also commence in 2015;

-  Improve existing campuses to the value of R600 million with additional classrooms,
   sport and cultural facilities. 13 campuses will see substantial improvements of at
   least R10 million per campus;

-  Invest in land banking for future growth to the value of R300 million; and

-  Invest R13 million in the further development of its curriculum.

Acquisitions
Since inception, Curro has acquired 13 schools with its own campuses and numerous
other smaller schools that were incorporated into existing Curro Group schools.
These acquired schools have contributed approximately 57% of the schools' EBITDA
for the six month period ended 30 June 2015.

Acquired schools boost growth as they have already been through the J-Curve effect
that newly developed schools still need to go through.

In January 2015, Curro concluded the acquisition of St Dominic's Academy, a 600
learner strong independent school based in Newcastle, KwaZulu-Natal for a purchase
consideration equal to business liabilities of R10 million.

Curro will continue to look for suitable value-enhancing acquisition opportunities.

Financial results
Revenue increased by 45% from R487 million to R705 million. Schools EBITDA
increased by 46% from R140 million to R204 million. EBITDA increased by 69% from
R97 million to R164 million. This was as a result of once-off head office expenses in the
prior comparative period and higher management fee income in the current period.
The EBITDA margin increased from 20% to 23%.

Net interest expense has increased by 83% from R30 million to R55 million as a result
of a higher interest expense at Meridian.

Headline earnings has increased by 82% from R28 million to R51 million. However,
headline earnings per share increased by 68% from 8.8 cents to 14.8 cents because
of the increased weighted number of shares in issue following the rights offer in May 2015.

Inter-company financial assistance to wholly-owned
subsidiaries that own properties

Notice is hereby given, in terms of section 45(5)(a) of the
Companies Act, No. 71 of 2008, as amended ("the Companies
Act"), that the board of directors of Curro ("the Board"), at
a meeting held on 12 August 2015, authorised the Company to
provide financial assistance, as may be required from time to
time, to its wholly-owned subsidiaries that own properties, by
way of the granting of loans up to a maximum of R200 million,
which loans bear interest ranging from zero percent to prime
interest rate. This authority was granted to the Board by
shareholders at Curro's annual general meeting held on 19 June
2015.

The Board, prior to authorising the aforementioned financial
assistance, considered and satisfied itself, in terms of
section 45 of the Companies Act, that:

1.   Immediately after providing the financial assistance, the
     Company would satisfy the solvency and liquidity test as
     contemplated in section 4 of the Companies Act;

2.   There has been due compliance with the Company's
     memorandum of incorporation; and

3.   The terms of the financial assistance are fair and
     reasonable in relation to the Company.

Prospects
Curro remains on track to achieve its vision of '80@20', being 80 campuses (200
schools) and accommodating 90 000 learners by 2020.

On behalf of the board

SL Botha                   CR van der Merwe
Chairperson                Chief Executive Officer

13 August 2015

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")

Statutory and administration

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  Corporate advisor and sponsor: PSG Capital  These results are available at: www.curro.co.za

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

Develop future leaders through world class education
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