Wrap Text
Reviewed Results For The Year Ended 31 December 2016
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")
REVIEWED RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2016
Headline earnings
up 69%
from R100m
to R169m
HEPS
up 55%
from 28.3 cents
to 43.9 cents
EBITDA
up 33%
from R292m
to R387m
Revenue
up 27%
from R1 384m
to R1 761m
Learners
up 14%
from 41 864
to 47 589
Condensed consolidated statement of comprehensive income
Reviewed Audited
Percentage 31 Dec 2016 31 Dec 2015
change R million R million
Revenue 27% 1 761 1 384
Operating expenses 26% (1 374) (1 092)
Earnings before interest, taxation, depreciation and amortisation (EBITDA) 33% 387 292
Schools EBITDA 30% 497 382
Head office EBITDA 22% (110) (90)
Depreciation and amortisation 27% (108) (85)
Earnings before interest and taxation (EBIT) 35% 279 207
Investment revenue 119% 59 27
Gain from bargain purchase 275% 15 4
Share of profits of associates 0% 1 1
Impairment 83% (11) (6)
Finance costs 8% (127) (118)
Profit before taxation (PBT) 88% 216 115
Taxation 109% (48) (23)
Profit for the period (PAT) 83% 168 92
Other comprehensive income:
Net fair value (loss)/profit on cash-flow hedges, after taxation Na (21) 25
Total comprehensive income 26% 147 117
Profit attributable to:
Owners of the parent 76% 172 98
Non-controlling interest (33%) (4) (6)
83% 168 92
Total comprehensive income attributable to:
Owners of the parent 23% 151 123
Non-controlling interest (33%) (4) (6)
26% 147 117
Reconciliation of headline earnings:
Earnings attributable to owners of the parent 172 98
Adjusted for:
Loss on impairment 11 6
Gain from bargain purchase (15) (4)
Loss on disposal of property, plant and equipment 1 –*
Headline earnings 69% 169 100
EBITDA margin 22% 21%
EBITDA margin for schools 29% 28%
Earnings per share (cents)
– Basic 61% 44.7 27.8**
– Diluted 63% 44.5 27.4**
Headline earnings per share (cents)
– Basic 55% 43.9 28.3**
– Diluted 57% 43.7 27.9**
Number of shares in issue (million)
– Basic 407.2 362.2**
– Diluted 408.8 367.8**
Weighted average number of shares in issue (million)
– Basic 384.7 353.5**
– Diluted 386.3 359.1**
* Balances less than R500 000 is displayed as Nil in million rounding.
** Earnings per share and headline earnings per share for the comparative period have been adjusted downwards by 0,4 cents for the year ended 31 December 2015
compared to the audited annual financial statements for the year ended 31 December 2015. This is due to the retrospective adjustment for the bonus element of
the 2016 rights offer undertaken. The adjustment to basic and diluted weighted average number of shares in issue is an increase of 5.2 million and 5.3 million
shares for the year ended 31 December 2015 due to the bonus element contained within the rights offer.
Condensed consolidated statement of financial position
Reviewed Audited
31 Dec 2016 31 Dec 2015
R million R million
ASSETS
Non-current assets 6 269 4 748
Property, plant and equipment* 5 635 4 242
Goodwill 428 333
Intangible assets 167 134
Investment in associate 11 10
Other financial assets 28 29
Current assets 1 052 331
Inventories 10 8
Current tax receivable 7 6
Other financial assets 244 50
Trade receivable** 29 20
Other receivables** 56 16
Cash and cash equivalents 706 231
Total assets 7 321 5 079
EQUITY AND LIABILITIES
EQUITY
Equity attributable to equity holders of parent 4 976 3 088
Share capital 4 556 2 834
Reserves 23 39
Retained income 397 215
Non-controlling interest (12) (7)
Total equity 4 964 3 081
LIABILITIES
Non-current liabilities 1 942 1 750
Loans and other financial liabilities 1 624 1 561
Deferred tax 318 189
Current liabilities 415 248
Loans and other financial liabilities 27 28
Trade and other payables 126 110
Prepaid school fees and deposits 171 104
Development and Acquisition payables** 91 6
Total liabilities 2 357 1 998
Total equity and liabilities 7 321 5 079
Net asset value per share (cents) 1 222 853
* In the current year, management reclassified R50 million of Property, plant and equipment to Other financial assets with respect to the comparative year 31
December 2015 in the condensed consolidated statement of financial position. The reclassification had no effect on the condensed consolidated statement of
financial position in the previous year other than to more appropriately reflect the nature of the underlying transaction.
** Trade and other receivables has been separated between Trade receivables and Other receivables and Development payables was grouped with the Acquisition
payables with respect to the comparative year, 31 December 2015. The reclassification had no effect on the condensed consolidated statement of financial
position other than to enhance the comparability of the balances.
Condensed consolidated statement of cash flows
Reviewed Audited
Percentage 31 Dec 2016 31 Dec 2015
change R million R million
Cash generated from operations 30% 399 306
Taxation paid (11%) (8) (9)
Finance costs (25%) (68) (91)
Working capital movements Na 81 (44)
Net cash generated from operating activities 149% 404 162
Net cash utilised in investing activities 65% (1 700) (1 030)
Net cash inflow from financing activities 96% 1 771 904
Cash and cash equivalents movement for the period 475 36
Cash and cash equivalents at the beginning of the period 231 195
Cash and cash equivalents at the end of the period 706 231
Condensed consolidated statement of changes in equity
Reviewed Audited
31 Dec 2016 31 Dec 2015
R million R million
Balance at the beginning of the period 3 081 2 211
Total comprehensive income 147 117
Issue of shares 1 749 756
Share issue costs (27) (14)
Recognition of share-based payments 14 11
Balance at the end of the period 4 964 3 081
KEY RATIOS (UNREVIEWED)
31 Dec 31 Dec 31 Dec 31 Jan
2014 2015 2016 2017
Number of campuses 33 42 49 54
Number of schools 80 101 115 127
Number of learners 28 737 35 970 43 183 47 589
Average number of learners per campus 871 856 881 881
Number of employees 3 128 3 969 4 806 4 990
Number of educators 1 905 2 339 2 595 2 734
Learner/educator ratio 15 15 17 17
Building size (m(2)) 392 314 449 067 558 683
Land size (ha) 298 359 434
Capital investment (R million) 1 305 1 030 1 700
– Current campuses 651 646 571
– New campuses 482 369 649
– Acquisitions 172 15 266
– Embury – – 214
J-Curve (Unreviewed)
The table below illustrates the J-Curve effect from newly established schools to more mature schools by age.
Number at 31 Dec 2016 Learner numbers (Dec) Growth Schools EBITDA (R million) Growth EBITDA margin Eventual capacity
Campuses Schools 2014 2015 2016 14/15 15/16 2014 2015 2016 14/15 15/16 2014 2015 2016 2014 2015 2016
Developed schools 33 80 14 645 20 694 24 699 41% 19% 111 174 258 57% 48% 23% 23% 27% 40% 40% 42%
2009 and before* 3 8 3 100 3 332 3 470 7% 4% 31 37 44 19% 20% 28% 28% 29% 79% 84% 88%
2010 2 6 1 994 2 120 2 232 6% 5% 17 24 31 41% 29% 25% 29% 33% 62% 66% 69%
2011 6 16 3 721 4 337 4 567 17% 5% 25 40 52 60% 30% 19% 23% 26% 39% 45% 47%
2012 2 6 1 362 1 618 1 788 19% 11% 8 15 19 88% 24% 17% 23% 25% 40% 48% 53%
2013 4 11 3 645 4 922 5 757 35% 17% 37 67 93 78% 37% 32% 38% 41% 37% 50% 59%
2014 4 8 823 1 271 1 531 54% 20% (7) 1 3 Na 200% (32%) 2% 2% 12% 19% 22%
2015 8 19 - 3 094 4 767 - 54% - (10) 17 - Na - (13%) 13% - 20% 31%
2016 4 6 - - 587 - - - - (1) - - - - (2%) - - 10%
Acquired schools 16 35 14 092 15 276 18 484 8% 21% 151 211 243 40% 15% 30% 33% 30% 72% 75% 73%
2012 and before 8 17 6 483 6 851 6 884 6% – 97 121 130 25% 7% 36% 38% 36% 68% 72% 72%
2013 2 3 5 690 5 779 5 541 2% (4%) 45 52 52 16% 0% 29% 30% 28% 74% 75% 71%
2014 2 5 1 919 2 046 2 441 7% 19% 9 34 43 278% 26% 12% 28% 29% 82% 84% 85%
2015 and 2016 4 10 - 600 3 618 - 503% - 4 18 - 350% - 17% 19% - 81% 69%
Property rental and royalties (3) (4)
Total 49 115 28 737 35 970 43 183 25% 20% 262 382 497 46% 30% 26% 28% 29% 51% 50% 52%
Note
Learner numbers refer to as at the end of December annually. Acquired schools indicates the year the school was incorporated in Curro.
All acquired schools have at least been established for more than seven years.
* 2009 and before schools has a maximum of 20 learners per class which has a direct impact on the EBITDA. Other schools have a maximum of
25 learners for Curro and Select or 35 for Meridian or Academy schools.
CONDENSED CONSOLIDATED SEGMENTAL REPORT
Reviewed Audited
Percentage 31 Dec 2016 31 Dec 2015
change R million R million
Revenue 27% 1 761 1 384
– Curro 32% 1 461 1 110
– Meridian 7% 252 235
– Embury Institute for Higher Education 23% 48 39
Schools EBITDA 30% 497 382
– Curro 33% 424 318
– Meridian 11% 62 56
– Embury Institute for Higher Education 38% 11 8
Net head office expenditure 22% (110) (90)
– Curro 25% (99) (79)
– Meridian 0% (11) (11)
– Embury Institute for Higher Education – –
EBITDA margins 22% 21%
– Curro 22% 22%
– Meridian 20% 19%
– Embury Institute for Higher Education 23% 20%
Headline earnings 69% 169 100
– Curro 68% 178 106
– Meridian 55% (17) (11)
– Embury Institute for Higher Education 60% 8 5
Headline earnings per share (cents) 55% 43.9 28.3
– Curro 55% 46.2 29.9
– Meridian 42% (4.4) (3.1)
– Embury Institute for Higher Education 40% 2.1 1.5
Earnings per share (cents) 61% 44.7 27.8
– Curro 60% 47.0 29.4
– Meridian 42% (4.4) (3.1)
– Embury Institute for Higher Education 40% 2.1 1.5
Total assets 44% 7 321 5 079
– Curro 46% 6 390 4 368
– Meridian (1%) 679 681
– Embury Institute for Higher Education 740% 252 30
Total liabilities 18% 2 357 1 998
– Curro 6% 1 414 1 339
– Meridian 11% 718 648
– Embury Institute for Higher Education 1 945% 225 11
Net asset value per share (cents) 43% 1 222 853
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. STATEMENT OF COMPLIANCE
The provisional condensed consolidated financial statements for the year ended 31 December 2016 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 provisional 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 2015. The provisional condensed consolidated financial statements have been
prepared internally under the supervision of the Chief Financial Officer, B van der Linde, CA(SA) CFA.
2. REVIEW CONCLUSION
The provisional condensed consolidated financial statements for the year ended 31 December 2016 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 report on all of the information contained in this announcement/provisional report.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement 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 provisional report.
3. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the provisional condensed consolidated financial statements are
consistent with those of the annual financial statements for the year ended 31 December 2015. For a full list of
standards and interpretations which have been adopted, we refer you to our 31 December 2015 annual financial statements.
4. SHARE CAPITAL
Effective 13 May 2016, 32.4 million shares were issued by way of an underwritten renounceable rights offer at a
subscription price of R33.00 per rights offer share, in the ratio of 1 rights offer share for every 11 Curro ordinary
shares. On 13 October 2016, 2.2 million shares were issued to employees through the Curro share incentive scheme. Curro
also issued 15.6 million shares through private placements during the year.
5. BUSINESS COMBINATIONS
Curro acquired three independent schools during the year being, the business operations and properties of Windhoek
Gymnasium, St Conrad's College and the equity of Building Blocks pre-and primary schools.
Group*
Aggregated business combinations
Property, plant and equipment 314
Intangible assets 9
Trade and other receivables 3
Cash and cash equivalents 12
Other financial liabilities (12)
Deferred tax liabilities (90)
Trade and other payables (5)
Total identifiable net assets 231
Goodwill 96
Gain on bargain purchase (15)
312
Consideration paid
Cash 278
Deferred purchase consideration 34
312
Net cash outflow on acquisition
Cash consideration paid (278)
Cash acquired 12
(266)
*Reviewed
6. IFRS 13 SWAP DISCLOSURE
2016 2015
SWAP asset 585 19 852
The interest rate swap agreements are measured using market-to-market rates by the issuer of the instruments and
represents a Level 2 fair value measurement for financial reporting purposes.
7. EVENTS AFTER THE REPORTING PERIOD
No events have been identified.
RESULTS COMMENTARY
Learner numbers
31 Jan 31 Jan 31 Jan YOY YOY
2015 2016 2017 increase increase %
Curro and Select 24 362 29 112 33 158 4 046 14
Curro Academy 990 1 633 3 796 2 163 132
Meridian 9 847 10 279 9 657 (622) (6)
Embury 822 840 978 138 16
Total 36 021 41 864 47 589 5 725 14
We opened the 2017 academic year with 54 campuses. Learner numbers increased from 41 864 in January 2016 to
47 589 at present.
Good growth was achieved in both the Curro and Curro Academy markets. Growth in the Meridian market has been slower.
The education sector is not immune to the impact of the economic downturn in South Africa. However, it is pleasing that
bad debt as a percentage of turnover remains at around 1%.
Tertiary education
In 2016 Curro commenced with the expansion of its tertiary-education business, Embury. At the end of 2017, the Embury
operations will move to a new facility in Durban that can accommodate 2 600 students. The original campus could host 1
000 students. Embury is adding two new campuses to their offering, being Waterfall in Midrand and Montana in Pretoria,
which will be ready for full intake in 2018.
Embury is also in the process of concluding a transaction with Ba-Isago University in Botswana as announced on 21
November 2016.
We believe that the tertiary-education component can reach more than 100 000 students over the long term.
In view of the potential future growth of the tertiary-education market, Curro has separated the schools and
tertiary-education businesses to keep management focused and for segmental reporting purposes. It is envisaged that the
tertiary-education business will unbundle and list separately during the year. More details will follow on SENS in due
course.
Organisational changes
In line with Curro's succession strategy, Andries Greyling, the current Chief Operating Officer of Curro Holdings
Limited, will take over from Chris van der Merwe as Chief Executive Officer from 1 July 2017.
Chris van der Merwe, founder of Curro Holdings Limited and current CEO, will become a non-executive director and
strategic advisor to Curro. He will also be the non-executive chairperson of the tertiary-education company.
Johan Human, a co-founder of Embury, will remain Embury's CEO. Samara Totaram, previously CEO of Meridian, has taken up
the position as Chief Financial Officer of the tertiary-education company.
Academic results
Curro is pleased with the academic results of its schools and continues to drive innovation in order to improve the
outcomes.
Unreviewed Unreviewed Unreviewed Unreviewed
IEB NSC*
2015 2016 2015 2016
Number of learners 724 877 707 773
Pass rate 99% 99% 98% 93%
University exemption 82% 84% 57% 42%
Ave no. of A's per learner 1,1 1,2 0,6 0,3
Average > 60% 69% 70% 43% 30%
* Meridian schools and Curro Academies
Financial results
Revenue increased by 27% from R1 384 million in 2015 to R1 761 million in 2016. Schools' EBITDA increased by 30% from
R382 million to R497 million over the same period, with EBITDA increasing by 33% from R292 million to R387 million. The
increase is attributable to the increase in learner numbers. Satisfactory EBITDA margin growth is evident in schools
where capacity utilisation increases.
The EBITDA margin increased from 21% to 22%.
Net interest expense decreased by 25% from R91 million to R68 million due to increased interest income, which is a
result of Curro shares issued in a rights issue, and private placements. Headline earnings increased by 69% from R100
million to R169 million. However, headline earnings per share increased by 55% from 28,3 cents to 43,9 cents due to the
increase in the weighted average number of shares in issue following the rights offer and private placements undertaken
in the year.
Capital investment
During 2016 Curro Holdings invested R1.7 billion in the business. The most significant investments included:
- Construction of nine new campuses to the value of R763 million. These campuses include Curro Waterfall primary
school (Gauteng), Curro Century City high school (Western Cape), Curro Krugersdorp high school (Gauteng), Curro
Rivonia (Gauteng), Curro Academy Wilgeheuwel (Gauteng), Curro Academy Clayville (Gauteng), Curro Academy Pretoria
(Gauteng) and a campus for the Embury Institute for Higher Education in Waterfall Estate (Gauteng).
- R571 million invested in the expansion of existing campuses, which included significant expansions at Curro Mount
Richmore, Curro Roodeplaat, Meridian Cosmo City, Meridian Pinehurst, St Dominics and Waterstone College.
- R100 million invested in land banking.
Curro plans to invest up to R1.8 billion in 2017.
Funding
During the year Curro raised R1 749 million of equity funding:
- R1 071 million through a rights issue;
- R650 million through two private placements; and
- R28 million as a result of shares issued to its employees through the share incentive scheme.
Curro remains lowly geared with a debt to equity ratio of 33%, being 21% if you exclude the ring-fenced Meridian entity.
The 2017 investments will be funded through a combination of own cash and debt funding.
Dividend
No dividend has been declared for the year under review.
Prospects
Curro remains optimistic about the growth prospects for the education sector .
On behalf of the board
SL Botha CR van der Merwe
Chairperson Chief Executive Officer
28 February 2017
STATUTORY AND ADMINISTRATION
Directors: SL Botha** (Chairperson), CR van der Merwe (CEO), AJF Greyling (COO),
B van der Linde (CFO), HG Louw (CIO), PJ Mouton*, B Petersen**, ZL Combi**, SWF Muthwa**
* Non-executive
** Independent non-executive
Registered office: 38 Oxford Street, Durbanville, 7550
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Bierman Avenue, Rosebank, Johannesburg, 2196
Corporate advisor and sponsor: PSG Capital
Date: 28/02/2017 07:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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