Curro’s share price fell as much as 9.4% on Tuesday, the most in six months, after SA’s biggest private school group said first-half headline earnings would drop up to 52.5%.
Curro, which is part of investment group PSG founded by Jannie Mouton, managed to increase its average pupil numbers 7% and revenue 12% in the six months to June. The number of its students stood at 66,153 in February.
Headline earnings per share, the main profit measure in that it excludes one-off items, will drop 44.6%-52.5% in the six months to June, from the year-ago period, skewed by the issue of new shares relating to its R1.5bn rights offer, which was used to reduce debt and acquire more schools.
Earlier in May, it announced the acquisition of HeronBridge College in Fourways, as part of Curro’s select schools model, which focuses on acquiring standalone education institutions with a rich heritage and superior facilities to cater for upper-income consumers.
The transaction is awaiting competition authority approval.
Recurring headline earnings per share, the group’s preferred measure of underlying financial performance, is likely to have fallen 47%-54%, the company said in a statement.
Curro expects “a more balanced distribution of earnings across the 2021 financial year”, after Covid-19 threw it a curve ball in 2020 in particular.
The group had higher revenues in the first half of 2020, but in the second half was hit by higher nonpayment of fees due to the pandemic hitting families and higher municipal rates. It had to ramp up online education solutions to ensure the continuation of the school curriculum and offer discounts to some families affected by the lockdown.
CEO Andre Greyling said at its June annual general meeting that municipal rates had increased 37% between 2019 and 2020. Much higher municipal rates in 2021 continued to add to its operational costs, Curro said in the statement.
Curro’s ancillary revenue made from operations such as aftercare and boarding hostels, is expected to be lower than in the first halves of 2020 and 2019, respectively, partly due to declining pupil numbers using school bus transport to and from schools.
“The levels of bad debts and fee discounts remain higher than what the company experienced historically before Covid-19. The nonperforming portion of the debtors book mainly relates to learners that have left Curro, and concerted efforts are being made to recover some [of it],” the company said.
The share price was down the most in five weeks, 4.7% at R11.20 at close of trade on the JSE, valuing Curro at R6.69bn.
With Katharine Child
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.