Private school group Curro is partnering with the Namibian Government Institutions Pension Fund, Ino Harith Capital and the Development Bank of Namibia to develop two schools, without the cost of building, as a cheaper way to expand without investing heavily in the rest of Africa.
This means it does not pay the entire cost of building the schools in Namibia but brings its expertise in running private schools into the equation.
It already has one school in Windhoek and another in Gaborone in Botswana but does not see the rest of Africa as a major frontier for expansion, and considered the Namibian partnership to be low risk.
Curro has 182 schools on 78 campuses, mostly in SA, having spent much of the past ten years expanding and investing in new properties. It is now trying to fill vacant spaces for learners in schools to grow profit.
CEO Cobus Loubser said: “Our primary aim in the foreseeable future is to bolster and enhance the utilisation of our current facilities.”
In the half year to end-June, the group grew new students 3% to 72,385, while revenue was up 16% to R2.4bn. Fees increased about 8% with the other 8% rise in revenue coming from new schools, about 2,000 new students and an increase in extra-curricular activity payments.
Headline earnings per share (Heps) increased 26% to 34.6c.
Loubser faced tough questioning at the results webinar on whether 3% growth was enough: “I would have liked to see more. But I think one has to be quite balanced.
“[If you] look at the results of other consumer-orientated operations, I think it’s pretty tough. And it feels that we are swimming a little bit against the tide and all the headwinds.”
Evidence suggests that even as the consumer is strained, there is still demand for high-quality schooling, while clothing and building firms have seen sales decline and banks are reporting an increase in bad debt.
Curro’s long-term debt of about R3bn is about three times that of annual earnings before interest, tax and depreciation, a ratio that banks use to measure if revenue can meet debt obligations.
Loubser said he is happy with the level of debt and, as revenue rises, it will decrease as a percentage of earnings.
Facility costs, which refer to water, electricity and municipal rates, increased about 15% in the period, although it was only 7% when excluding the additional cost of diesel for generators.
Loubser said he expects the rates for schools in Johannesburg to rise in the future.
In 2022, Curro was part of a court case fought with other school groups and rights group Afriforum to stop the City of Johannesburg from raising property rates as much as tenfold as schools were reclassified from education institutions to businesses.
It won on an administrative technicality as the City of Johannesburg had not consulted on the classification change correctly. Loubser said the city is in the same position as last year and he expected it to try to increase rates again.
Curro did not pay a dividend but used excess capital to buy back shares. Companies may buy back shares to lift their share price when they think it is undervalued. Curro acquired 2.4-million shares amounting to R19.3m in June.
Its schools comprise the Meridian middle-class school brand, which has about 35 learners per class, and Curro schools, which are more upmarket and have 25 or fewer students per class.
Curro turned 25 this year. Its share price closed 2.86% higher at R9.35.
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