Wrap Text
Results For The Six Months Ended 30 June 2017
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")
RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017
Revenue 24% up from R872m to R1085m
Operational EBITDA* up 24% from R259m to R322m
Headline earnings:
Schools** - increased 53% from R74m to R113m
Stadio - decreased 142% from R7m to (R3m)
Group - increased 36% from R81m to R110m
HEPS:
Schools** - increased 37% from 20.2 cents to 27.6 cents
Stadio - decreased 139% from 1.8 cents to (0.7cents)
Group - increased 22% from 22.0 cents to 26.9 cents
* Excludes head office expenditure
** Includes Curro and Meridian schools only
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
30 Jun 2017 30 Jun 2016 31 Dec 2016
Percentage 6 months 6 months 12 months
change R million R million R million
Revenue 24% 1 085 872 1 761
Operating expenses 26% (831) (661) (1 374)
Earnings before interest, depreciation and
amortisation (EBITDA) 20% 254 211 387
- Operational EBITDA 24% 322 259 497
- Head office EBITDA 42% (68) (48) (110)
Depreciation and amortisation 35% (70) (52) (108)
Earnings before interest and taxation (EBIT) 16% 184 159 279
Investment revenue 50% 27 18 59
Gain from bargain purchase - - 15
Share of profits of associates* -* - 1
Impairment - - (11)
Finance costs (12%) (69) (78) (127)
Profit before taxation (PBT) 43% 142 99 216
Taxation 95% (37) (19) (48)
Profit for the period (PAT) 31% 105 80 168
Other comprehensive income:
Net fair value loss on cash-flow hedges, after taxation (83%) (3) (18) (21)
Total comprehensive income 65% 102 62 147
Profit attributable to:
Owners of the parent 37% 111 81 172
Non-controlling interest 500% (6) (1) (4)
31% 105 80 168
Total comprehensive income attributable to:
Owners of the parent 71% 108 63 151
Non-controlling interest 500% (6) (1) (4)
65% 102 62 147
Reconciliation of headline earnings:
Earnings attributable to owners of the parent 37% 111 81 172
Adjusted for:
Impairment - - 11
Gain from bargain purchase - - (15)
(Profit)/loss on disposal of property, plant and equipment (1) - 1
Headline earnings 36% 110 81 169
EBITDA margin 23% 24% 22%
Operational EBITDA margin 30% 30% 29%
Earnings per share (cents)
- Basic 24% 27.2 22.0 44.7
- Diluted 25% 27.1 21.6 44.5
Headline earnings per share (cents)
- Basic 22% 26.9 22.0 43.9
- Diluted 24% 26.8 21.6 43.7
Number of shares in issue (millions)
- Basic 407.2 389.3 407.2
- Diluted 408.9 395.6 408.8
Weighted average number of shares in issue (millions)
- Basic 407.2 370.2 384.7
- Diluted 408.9 376.5 386.3
* Balances less than R500 000 are displayed as Nil in million rounding.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
30 Jun 2017 30 Jun 2016 31 Dec 2016
Percentage 6 months 6 months 12 months
change R million R million R million
Cash generated from operations 20% 262 218 399
Tax paid (100%) - (4) (8)
Net finance cost (30%) (42) (60) (68)
Working capital movements Na (53) 49 81
Net cash generated from operating activities (18%) 167 203 404
Net cash utilised in investing activities (8%) (487) (529) (1 700)
Net cash from financing activities (97%) 32 1 134 1 771
Cash and cash equivalents movement for the period (288) 808 475
Cash and cash equivalents at the beginning of the period 706 231 231
Cash and cash equivalents at the end of the period 418 1 039 706
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 Jun 2017 30 Jun 2016 31 Dec 2016
6 months 6 months 12 months
R million R million R million
ASSETS
Non-current assets 6 928 5 344 6 509
Property, plant and equipment* 6 275 4 778 5 875
Goodwill 437 397 428
Intangible assets 178 147 167
Investment in associate 11 9 11
Other financial assets 27 13 28
Current assets 502 1 101 812
Inventories 6 6 10
Current tax receivable 2 5 7
Other financial assets* 3 - 4
Trade receivables** 43 37 29
Other receivables** 30 14 56
Cash and cash equivalents 418 1 039 706
Total assets 7 430 6 445 7 321
EQUITY
Equity attributable to equity holders of parent 5 091 4 209 4 976
Share capital 4 556 3 885 4 556
Reserves 28 28 23
Retained income 507 296 397
Non-controlling interest (17) (9) (12)
Total equity 5 074 4 200 4 964
LIABILITIES
Non-current liabilities 2 009 1 895 1 942
Loans and other financial liabilities 1 658 1 640 1 624
Deferred tax 351 255 318
Current liabilities 347 350 415
Loans and other financial liabilities 27 36 27
Trade and other payables 126 105 126
Prepaid school fees and deposits 177 155 171
Development and acquisition payables** 17 54 91
Total liabilities 2 356 2 245 2 357
Total equity and liabilities 7 430 6 445 7 321
Net asset value per share (cents) 1 246 1 079 1 222
* In the current year, management reclassified R240 million of other financial assets to property, plant and equipment
with respect to the year ended 31 December 2016 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 appropriately reflect the nature of the underlying transaction, which has changed since December 2016.
** Trade and other receivables was separated into trade receivables and other receivables, and development payables was
grouped with the acquisition payables with respect to the comparative year, 30 June 2016. The reclassification had no
effect on the condensed consolidated statement of financial position other than to disclose the figures more
appropriately.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
30 Jun 2017 30 Jun 2016 31 Dec 2016
6 months 6 months 12 months
R million R million R million
Balance at the beginning of the period 4 964 3 081 3 081
Total comprehensive income 102 62 147
Issue of shares - 1 070 1 749
Share issue costs - (20) (27)
Other 8 7 14
Balance at the end of the period 5 074 4 200 4 964
CONDENSED CONSOLIDATED SEGMENTAL REPORT
Unaudited Unaudited Audited
30 Jun 2017 30 Jun 2016 31 Dec 2016
Percentage 6 months 6 months 12 months
change R million R million R million
Learner numbers 14% 47 002 41 393 43 183
- Curro 20% 36 288 30 286 32 545
- Meridian (6%) 9 602 10 267 9 798
- Stadio 32% 1 112 840 840
Revenue 24% 1 085 872 1 761
- Curro 28% 915 714 1 461
- Meridian 4% 136 131 252
- Stadio 26% 34 27 48
Operational EBITDA 24% 322 259 497
- Curro 34% 287 214 424
- Meridian (19%) 29 36 62
- Stadio (33%) 6 9 11
Net head office expenditure 42% (68) (48) (110)
- Curro 25% (55) (44) (99)
- Meridian 50% (6) (4) (11)
- Stadio 100% (7) - -
EBITDA margin 23% 24% 22%
- Curro 25% 24% 22%
- Meridian 17% 24% 20%
- Stadio (3%) 33% 23%
Headline earnings* 36% 110 81 169
- Curro 64% 128 78 173
- Meridian 275% (15) (4) (12)
- Stadio Na (3) 7 8
Headline earnings per share (cents)* 22% 26.9 22.0 43.9
- Curro 47% 31.4 21.3 45.0
- Meridian 245% (3.8) (1.1) (3.2)
- Stadio Na (0.7) 1.8 2.1
Earnings per share (cents)* 24% 27.2 22.0 44.7
- Curro 49% 31.7 21.3 45.8
- Meridian 245% (3.8) (1.1) (3.2)
- Stadio Na (0.7) 1.8 2.1
Total assets 15% 7 430 6 445 7 321
- Curro 18% 6 525 5 551 6 390
- Meridian 3% 656 639 679
- Stadio (2%) 249 255 252
Total liabilities 5% 2 356 2 245 2 357
- Curro 5% 1 421 1 347 1 414
- Meridian 7% 710 666 718
- Stadio (3%) 225 232 225
Net asset value per share (cents) 15% 1 246 1 079 1 222
* Headline earnings, earnings per share (EPS) and headline earnings per share (HEPS) for segmental reporting purposes
have been adjusted for the comparative periods, the six months ending 30 June 2016 and the year ended 31 December 2016.
The headline earnings, EPS and HEPS for the group remained unchanged as per the audited financial statements for the
year ended 31 December 2016.
J-curve
The table below illustrates the J-curve effect from the newly established schools to more mature schools by age. All
amounts are as at 30 June.
Number at 30 Jun Learner numbers Growth Ops EBITDA** Growth EBITDA margin Eventual capacity
2017 (R million)
Campuses Schools 2015 2016 2017 15/16 16/17 2015 2016 2017 15/16 16/17 2015 2016 2017 2015 2016 2017
Developed schools 38 91 20 734 24 344 28 315 17% 16% 89 132 179 49% 35% 23% 28% 30% 40% 42% 45%
2009 and before* 3 8 3 313 3 422 3 443 3% 1% 19 23 28 23% 22% 29% 30% 33% 84% 86% 87%
2010 2 6 2 131 2 216 2 254 4% 2% 12 15 20 26% 33% 29% 32% 38% 66% 69% 70%
2011 6 16 4 382 4 530 4 552 3% - 20 28 31 40% 11% 23% 27% 28% 45% 47% 47%
2012 2 6 1 599 1 764 1 904 10% 8% 8 9 14 17% 56% 23% 23% 31% 48% 53% 57%
2013 4 12 4 918 5 651 6 149 15% 9% 34 48 55 41% 15% 37% 42% 40% 50% 58% 63%
2014 4 8 1 267 1 506 1 833 19% 22% 1 2 3 120% 50% 5% 9% 8% 19% 22% 27%
2015 8 19 3 124 4 730 5 748 51% 22% (5) 9 19 n/a 111% (14%) 14% 21% 20% 30% 37%
2016 4 7 - 525 1 179 - 125% - (1) 7 - n/a - (14%) 25% - 9% 20%
2017 5 9 - - 1 253 - - - - 3 - - - - 14% - - 23%
Acquired schools 16 36 15 351 17 049 18 687 11% 10% 117 131 150 12% 14% 35% 30% 32% 75% 73% 73%
2012 and before 8 17 6 890 6 847 6 919 (1%) 1% 64 69 76 7% 10% 39% 36% 39% 72% 71% 72%
2013 2 3 5 795 5 541 5 365 (4%) (3%) 31 33 25 5% (25%) 33% 34% 24% 75% 71% 69%
2014 2 5 2 066 2 425 2 618 17% 8% 19 23 30 23% 30% 30% 31% 35% 84% 85% 92%
2015 and 2016 4 11 600 2 236 3 785 273% 69% 3 7 19 138% 176% 23% 19% 23% 81% 92% 72%
Property rental
and royalties (1) (4) (7)
Total 54 127 36 085 41 393 47 002 15% 14% 205 259 322 27% 24% 29% 30% 30% 50% 51% 53%
Note:
Learner numbers refer to as at the end of June annually. Acquired schools indicates the year the school was incorporated in Curro. All acquired
schools have been established for at least more than seven years.
* 2009 and before schools have 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.
** Ops EBITDA refers to operational EBITDA
NOTES TO THE FINANCIAL STATEMENTS
1. STATEMENT OF COMPLIANCE
The condensed consolidated interim financial information for the six months ended 30 June 2017 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 2016. The results have not been reviewed or audited by the Company's auditor. The condensed
consolidated interim results have been prepared internally under the supervision of the Chief Financial Officer, B van
der Linde, CA(SA) CFA.
2. ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the condensed consolidated interim financial information are
consistent with those of the annual financial statements for the year ended 31 December 2016. For a full list of
standards and interpretations that have been adopted, we refer you to our 31 December 2016 annual financial statements.
3. BUSINESS COMBINATIONS
Effective 1 January 2017, Curro acquired the business operations and property of Eco Kidz.
4. EVENTS AFTER THE REPORTING PERIOD
On 7 July 2017, Curro raised R150 million through the issue of 3.4 million ordinary shares, in terms of a general
authority to issue shares for cash.
KEY RATIOS
31 Dec 31 Dec 31 Dec 30 Jun
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 47 002
Average number of learners per campus 871 856 881 870
Number of employees 3 128 3 969 4 806 5 494
Number of educators 1 905 2 339 2 595 2 844
Learner/educator ratio 15 15 17 17
Building size (m(2)) 392 314 449 067 558 683 578 803
Land size (ha) 298 359 434 444
Capital investment (R million) 1 305 1 022 1 700 487
- Current campuses (R million) 651 638 571 295
- New campuses (R million) 482 369 649 159
- Acquisitions (R million) 172 15 266 12
- Stadio (R million) - - 214 21
RESULTS COMMENTARY
Curro provides education to more than 47 000 learners across 127 schools (54 campuses) throughout southern Africa.
The schools' business enjoyed continued revenue and margin growth against the comparative period in 2016. Curro
performed well overall, despite the seven Meridian campuses, operating in the rural lower-fee market, experiencing
pressure as a result of lower learner numbers compared to the previous year.
The tertiary business experienced growth with the acquisition of two businesses and good progress has been made with
respect to the unbundling and separate listing of Stadio Holdings (Stadio) on the JSE. The group results have been
presented with the school business and the tertiary business reflected separately.
Financial results
Consolidated revenue has increased by 24% from R872 million to R1 085 million, in line with growth in learner numbers
and fee increases.
Operational EBITDA has increased by 24% from R259 million to R322 million. The margin remained at 30% despite the
negative growth from Stadio and Meridian. The tougher economic conditions have led to an increase in net bad debts
written off, representing 1.6% of turnover as opposed to 0.9% of turnover in the prior comparative period.
Stadio's EBITDA (including head office expenditure) has decreased from R9 million to a R1 million EBITDA loss due to
corporate costs incurred in establishing and operating the head office component required for its pending separation as
well as acquisition related transaction costs.
The capital raised in the second half of 2016 and not yet deployed, has resulted in a decrease in the net interest
expense from R60 million to R42 million.
The effective tax rate has increased from 19% to 26% due to the reduced permanent tax difference arising from the
capital contribution made to the share incentive trust.
Consolidated headline earnings increased by 36% from R81 million to R110 million, with HEPS increasing by 22% from 22.0
cents to 26.9 cents.
Schools' headline earnings increased by 53% from R74 million to R113 million, with HEPS increasing by 37% from 20.2
cents to 27.6 cents.
Dividend
No dividend was declared for the period.
Investment activity
For the year, the schools' business of Curro is investing:
* R600 million in construction for the following new schools:
- Curro Academy Mamelodi in Pretoria East, Gauteng
- Curro Academy Riverside near Diepsloot, Gauteng
- Curro Academy Sandown in Sunningdale, Cape Town
- Curro Castle Oakdene in Turffontein, Gauteng
- Curro Castle Uitzicht in Durbanville, Cape Town
- Curro Roodeplaat High School, Pretoria, Gauteng
- Curro Sitari High School, Somerset West, Cape Town
* R900 million in expansion and capital investment replacement at existing schools.
As was previously announced on SENS, Stadio has acquired a 100% stake in AFDA and a 74% stake in Southern Business
School (SBS). The SBS acquisition, however, is subject to certain conditions precedent. The total committed acquisition
value is R540 million, with the additional investment into the three Embury campuses totalling R130 million.
Funding
An additional R150 million of equity was raised through a general issue of shares for cash. Curro will be refinancing
existing debt to the value of R850 million with cheaper funding of which the interest rates are approximately 80 bps
lower than current interest rates. Current and new debt financiers have also committed more than R2 billion in funding
for future expansion needs. Curro will utilise up to R1.2 billion of new funding for the remainder of the year.
Stadio will fund its acquisitions with the proceeds of a rights issue planned for later in the year, with Curro
providing the bridging financing until such time.
Stadio
Curro acquired Embury Institute for Higher Education Proprietary Limited (Embury) in 2012. Having an accredited teacher
training institution was considered a strategic asset at the time. Recently, the opportunity in the broader tertiary
market has become more apparent and, to focus on both the schools' and tertiary businesses separately, it was decided to
unbundle and list Stadio. Stadio will become the holding company for a number of tertiary businesses, which will include
Embury and the above-mentioned acquisitions.
Stadio will list at the end of September 2017. A pre-listing statement will be released in due course containing
comprehensive information about the business.
Change in Auditor
To ensure sufficient alignment with Curro Holdings’ holding company, PSG Group Ltd, and with due regard to the requirement
of Mandatory Audit Firm Rotation (MAFR), shareholders are hereby advised that a decision has been taken for Curro Holdings
to change its external auditor to Pricewaterhouse Coopers Inc. with immediate effect. The Company extends its sincere
appreciation to Deloitte & Touche for their services as auditor over the years.
Directorate
Former COO Andries Greyling has replaced Chris van der Merwe as CEO of Curro from 1 July 2017, when Chris became CEO of
Stadio. Chris will remain as a non-executive director and strategic adviser to the board of Curro.
Prospects
The fundamentals for the education sector remain strong and, over time, shareholders will be rewarded for the
significant investment made.
On behalf of the board,
SL Botha AJF Greyling
Chairperson Chief Executive Officer
15 August 2017
STATUTORY AND ADMINISTRATION
Directors: SL Botha** (Chairperson), ZL Combi**, AJF Greyling (CEO), HG Louw (CIO), PJ Mouton*, SWF Muthwa**,
B Petersen**, B van der Linde (CFO), CR van der Merwe*
* Non-executive
** Independent non-executive
Registered office: 38 Oxford Street, Durbanville, 7550
Transfer secretaries: Computershare Investor Services (Pty) Ltd Rosebank Towers, 15 Biermann Avenue, Rosebank,
Johannesburg, 2196
Corporate adviser and sponsor: PSG Capital
Date: 15/08/2017 07:30:00 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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