Curro, which operates private schools and colleges, says it plans to slow down its quest for new ventures in order to focus on growing its existing campuses and those yet to be launched.
CEO Andries Greyling said the company will shift its capital towards improving its basic education and tertiary institution campuses after investing R223m to launch five new schools in Gauteng, the Western Cape and Mpumalanga.
“We want to grow them to maturity and we still have a few greenfields that we are opening next year. We will always look for opportunities, but a bulk of our capital will be absorbed within the current campuses, so we need to go a bit slower on greenfields just to get the current schools to capacity,” he said.
Greyling said the new schools are part of the company’s strategy to introduce technology-driven and affordable education through its Dig-Ed schools and academies.
“Our biggest growth the past year is specifically from the academy market. It’s tough times, we’re all being challenged, but I believe that if you provide quality education and you put it down at the right price and at the right place, people will support you.”
The company, which operates in SA, Botswana and Namibia, said its recurring interim headline earnings (which does not include once-off charges) rose 7% to R153m, while recurring headline earnings per share increased 7% to 37.1c in the period.
Anthony Clark from Small Talk Daily said "the key thing that initially saw HEPS disappoint the market in the trading statement last week was the tax implication of the change of designation of a school in Namibia and the fact that interest costs are quite sharply because of all the funding of the new schools and the expansion that currently is going on."
Curro's student base increased 13% to 57,173, pushing the group’s revenue up 19% to R1.4bn as the private education industry battles a tough operating environment.
“The biggest challenge is that we are losing about 3,000 learners a year. We have not seen a massive amount of emigration but it is still there. The bulk of the problem for us is financial reasons as people cannot afford to pay fees,” Greyling said.
A speciality finance analyst at Avior Capital Markets, David Talpert, said the results reflect the current state of the private education sector, with high-fee private schools facing pressure from emigration, and parents taking their children out of lower-fee private schools due to financial constraints.
“The operating results were more positive than what the market expected. They have done pretty well to manage the retentions in this macro-economic environment,” said Talpert.
Its estimated investment in expansion and replacement of assets for the 2019 financial year is R1bn.
Its shares jumped 6.66% to R17.77 on Wednesday afternoon.
Clark said the reason why the stock was up on Wednesday, is because the market "is quite pleased that the company has shown that it does plan to reduce its capital expenditure in new greenfield expansion in the medium term that means that debt expansion will not be so great and hopefully the underlying expansion in interest costs will not be as high as the market expected "
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