Curro gearing up for a big one?

Curro CEO, Chris Van der Merwe. Curro CEO, Chris Van der Merwe.

Stellenbosch-based private schools operator Curro Holdings is seemingly anticipating acceleration in its already rapid growth – so much so that the directors see the need to raise a batch of fresh capital again. This is the fifth time in just five years that the company – which is controlled by respected investment house PSG – has needed to tap its shareholders for additional cash.

Curro enjoys its biggest geographical presence in the Western Cape with schools operating in Durbanville, Brackenfell, Century City, Langebaan, Hermanus and Mossel Bay. The company also operates a lower fee Meridean School in Pinehurst as well as Curro castle nursery schools in Brackenfell, Durbanville, George, Langebaan and Tyger Valley. A new Curro school is also being developed at Sitari in Somerset West.

When Curro released its year to end December results the CEO Chris van der Merwe detailed plans to raise R740m through a rights offer as part future growth plans.

During the 2014 financial year Curro spent some R1,3bn on the various expansionary projects – most notably four new Curro schools, two new Meridian schools and two new Curro Academy schools. The company acquired Waterstone College (Johannesburg South) for R130m and Grantleigh (Northern KZN) for R30m as well as completing the ‘land banking’ of seven sites to a value of about R100m. On top of that Curro also invested a substantial R650m on improvement and expansion at existing campuses.

Curro’s plans for the financial year ahead involve investing roughly R600m on the expansion of existing campuses as well as developing three new Curro schools and investing a further R250m in land banking of various key sites.

However, the new rights issue – and the proposed quantum of new funds to be raised – suggests Curro is very serious about investigating new acquisitions – remembering that last year the company raised R500m in long-term funding, drew down on R210m on facilities at Meridian and raised equity of R600m through a rights offer.

And it would appear that the acquisitions Curro might be considering are fairly big because aside from the R740m set to be raised in the rights issue, the company has indicated it plans to also raise as much as R700m in the debt market.  

Shareholders are likely to back the call for another rights issue as Curro’s profit performance in the year to end December showed encouraging progress with headline earnings up 51% to R55m. Revenue broke through the R1bn mark on the back of a 37% increase in learner numbers to 28,737 in 2014. More encouraging was that cash flow from Curro’s school network more than doubled to R247m.

Since year end, Curro has pushed its school network to 42 (with 36,000 learners,) and Dr Van der Merwe is confident that the target of 80 schools by 2020 is firmly on track.

“We thus achieved our original prelisting aim of 40 campuses by 2020 five years ahead of schedule.”

He noted that Curro’s school building programme was progressing much faster than the original forecast of three schools per year, and the company was working on a ten-year plan of building seven schools per year.

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