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COH
COH
COH - Curro - Unaudited interim results for the 6 months ended 30 June 2011
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")
Unaudited interim results for the 6 months ended 30 June 2011
Revenue up by 117%
Learners up by 79%
No of schools up from 5 to 12
Condensed group statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Revenue 79 271 36 527 74 028
Earnings before interest 5 659 6 347 12 800
taxation, depreciation and
amortisation("EBITDA")
Depreciation and (3 407) (1 177) (3 014)
amortisation
Earnings before interest 2 252 5 170 9 786
and tax
Net interest expense (13 226) (2 424) (5 106)
Profit before taxation (10 974) 2 746 4 680
Taxation 3 278 (391) 553
Total comprehensive (7 696) 2 355 5 233
(loss)/profit for the
period
Earnings per share (basic (9.6) 2.9 6.5
and diluted) (cents)
Headline earnings * (7 696) 2 355 5 233
Headline and diluted (9.6) 2.9 6.5
headline earnings per
share (cents)
* No non-headline earnings
items were included in the
total comprehensive (loss)
/ profit for the period
Number of shares in issue 80.6 80.4 80.4
Weighted average number of 80.4 80.1 80.2
shares in issue
Capitalisation dividend - 1.3 1.3
per share (cps)
EBITDA Margin 7.1% 17.4% 17.4%
PAT Margin - 6.4% 7.1%
Condensed group statement of financial position
Unaudited Unaudited Audited
30 June 2011 30 June 31
2010 December
2010
R`000 R`000 R`000
Assets
Non-current assets 410 291 157 118 236 889
Property, plant and 381 566 146 415 225 321
equipment
Goodwill 20 083 8 207 8 207
Intangible assets 6 847 1 843 1 783
Deferred tax assets 1 795 653 1 578
Current assets 12 304 3 828 6 422
Trade and other receivables 6 772 2 970 2 285
Cash and cash equivalents 5 532 858 4 137
Total assets 422 595 160 946 243 311
Equity and liabilities
Equity 49 842 54 808 57 686
Non-current liabilities 109 001 70 121 99 787
Current liabilities 263 752 36 017 85 838
Loan from holding company 226 649 13 534 54 440
Other financial liabilities 10 197 6 517 10 861
Tax liabilities (197) (342) 63
Trade and other payables 27 103 7 724 17 251
Bank overdrafts - 8 584 3 223
Total equity and liabilities 422 595 160 946 243 311
Net asset value per share 61.8 68.2 71.7
(cents)
Condensed group statement of cash flow
Unaudited Unaudited Audited
6 months to 6 months 12 months
30 June to to
2011 30 June 31
2010 December
2010
R`000 R`000 R`000
Cash generated from 5 659 6 347 12 768
operations (note 5)
Changes in working capital 5 365 309 2 999
- Trade and other (4 487) (1 045) (360)
receivables
- Trade and other payables 9 852 1 354 3 359
Interest income 207 39 137
Finance costs (13 433) (2 463) (5 243)
Taxation paid (260) (887) (594)
Net cash from operating (2 462) 3 345 10 067
activities
Net cash from investing (173 530) (56 109) (121 203)
activities
Net cash from financing 180 611 34 536 101 547
activities
Total cash movement for the 4 619 (18 228) (9 589)
period
Cash at the beginning of the 913 10 502 10 502
period
Total cash at the end of the 5 532 (7 726) 913
period
Condensed group statement of changes in equity
Unaudited Unaudited Audited
30 June 2011 30 June 31
2010 December
2010
R`000 R`000 R`000
Balance at the beginning of 57 686 52 453 52 453
the period
Total comprehensive income (7 696) 2 355 5 233
for the period
Dividends paid to - (1 017) (1 017)
shareholders
Shares issued 800 1 017 1 017
Capital raising expenses (948) - -
Balance at the end of the 49 842 54 808 57 686
period
Notes to the condensed group financial statements
1. Statement of compliance
The condensed financial information has been prepared in accordance with the
framework, concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as
issued by the Accounting Practices Board and in compliance with IAS 34:
Interim Financial Reporting. This report has been prepared using accounting
policies that comply with IFRS which are consistent with those applied in the
financial statements for the year ended 31 December 2010.
The results have not been audited or reviewed by the group`s auditors,
Deloitte & Touche.
2. Dividend
No dividend was paid during the interim period. For the comparative period in
the previous year a capitalisation dividend of 1.3 cps was paid.
3. Issued capital
During the period under review the company issued 200 000 shares at R4 per
share. Capital raising fees incurred were set off against share premium.
4. Borrowings
During the period under review, the group obtained additional funding from
its controlling shareholder. This loan was capitalised as part of the rights
issue process that was completed on 11 July 2011.
5. Note to the statement of cash flow
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Cash generated from 5 659 6 347 12 768
operations
(Loss)/profit before taxation (10 974) 2 746 4 680
Adjusted for:
- Depreciation and 3 407 1 177 3 014
amortisation
- Interest received (207) (39) (137)
- Finance costs paid 13 433 2 463 5 243
Profit on sale of asset (42)
Movement in operating lease 10
accruals
6. Business combinations
The initial accounting for the acquisitions made during the period under
review has not been finalised. This is the result of uncertainties
surrounding the valuation of certain tangible and intangible assets. These
uncertainties are expected to be resolved by 31 December 2011 and should not
have a material effect on the results for the period ended 30 June 2011.
Effective 1 January 2011, Curro acquired the following business operations:
- Aurora College for R43m;
- Overstrand Learning Academy and Berghof Pre-Primary in Hermanus for
R785 000;
- Heuwelkruin Kollege in Polokwane for R14,9m;
- Cape St Blaize in Mossel Bay for R2,7m; and
- Siloam Academy in Brakpan for R4m.
Fair value of assets acquired:
R`000
Purchase price 50 436
Property, plant and equipment 59 272
Intangible assets 5 324
Other assets 3 350
Liabilities (29 386)
Goodwill 11 876
Other key ratios
2011 2010 2009
Number of schools 12 5 3
Number of learners 5 519 3 083 2 059
Learners per campus* 460 617 686
Staff 654 343 251
Educators 446 247 201
Learner/educator ratio** 12.4 12.5 10.2
Building size (mSquared) 75 000 44 500 33 000
Land size (ha) 107 55 27
Capital investment R(m) 280 128 35
- Current campuses 30 13 13
- New campuses 170 114 21
- Acquisitions 80 1 1
* Average planned capacity of 1 400 learners per school
** Target of 18
Commentary
The business
Curro is the market leader in the provision of affordable, quality private
school education in South Africa. Learners from age 3 through to Gr 12 are
accommodated in all the educational phases namely:
- Early Childhood Development Centre (Playschool) (Ages 3 and 4);
- Reception Phase (Gr RR and Gr R);
- Foundation Phase (Gr 1 to Gr 3);
- Intermediate Phase (Gr 4 to Gr 6);
- Senior Phase (Gr 7 to Gr 9); and
- FET Phase (Gr 10 to Gr 12).
The company was established in 1998 with 28 learners receiving tuition in a
church building. Today it hosts more than 5 500 learners on 12 campuses
nationwide.
Curro develops or acquires schools and by applying its model and experience,
delivers excellent learning within an effective budget. The result is an
affordable educational product as an alternative to state school education.
The establishment of a campus requires significant capital investment. In
addition, the typical expenses of a school namely salaries of educators and
other staff, and operational costs (including property taxes, electricity and
water, curricula expenses and insurance) are mostly fixed in nature.
Therefore, until such time that the number of learners reaches a certain
critical mass, income does not necessarily cover the expenses. However, over
time revenue will increase disproportionately to the corresponding costs as
the capacities of the schools are reached.
Curro listed on the JSE Limited`s AltX Board on 2 June 2011 mainly to obtain
improved access to capital and funding. The company concluded a one for one
rights issue during July 2011 whereby R322,4m was raised. This has
strengthened the balance sheet and in doing so created gearing capacity to
further expand the schools` operations in South Africa. The listing
furthermore raised the profile of the company and enhanced the credibility of
the Curro brand name.
The industry
Given the demand for education across all communities in South Africa,
Government is now actively being assisted by the private sector in providing
this important service.
Globally, private school learners account for approximately 13% of all school
going children whilst the official number in South Africa is closer to 4%.
Curro therefore believes that the fundamentals remain strong for continuous
growth in this sector.
Curro places its product between the high-end private schools and the ex-
model C schools, catering for the broader South African population.
Results
On a comparative basis, Curro`s turnover has increased by 117% to R79,3m.
Organic growth accounted for 31%.
EBITDA has decreased by 16% to R5,7m as a result of the creation of learner
capacity through the increase in campuses from 5 to 12 coupled with an
increase in costs associated with a higher number of staff members and
educators. In so doing, the foundation has been laid for significant growth
in income without a corresponding increase in expenses going forward for
these specific schools.
The expanded vision has necessitated human capital investments at head office
level which included the Curro Centre for Education Excellence (CCEE),
information technology and other back office functions. Head office costs
have now reached a plateau that will not increase proportionately to the
addition of new campuses. Marketing costs increased to further establish the
brand which bode well for learner enrolments going forward. In summary, Curro
has now established a solid platform for its planned future growth.
Curro made a headline loss of R7,7m for the six months ended 30 June 2011
compared to a R2,4m profit last year. This was mainly as a result of
increased levels of debt brought about by the significant capital expansion
process over the last 2 years.
After the rights issue NAV on a historical cost basis will amount to R2.37
per share.
CCEE
Product quality is the most important aspect of our business. To ensure
consistency across all campuses, we established the CCEE. This unit`s mission
is to further equip our head masters (rectors) and the subject heads with
curriculum skills, technologies and content so that our written and delivered
curriculum can compete with educational systems of first world countries.
Furthermore, it is of the utmost importance that our curriculum remains
relevant to the kind of knowledge and skills base which is required by
companies and industries as well as colleges, universities and other
institutions of higher learning. In this regard we liaise with a wide range
of educational experts and curriculum writers in an attempt to strive towards
excellence.
Capital investments
For the year ending 31 December 2011 capital investments including
acquisitions are about R280m. This includes the construction of new campuses
at Nelspruit, Serengeti Golf and Wildlife Estate (Kempton Park), Hermanus,
Mossel Bay, the acquisition of Aurora Private School in JHB, Heuwelkruin
(Polokwane) as well as the addition of capacity at Durbanville, Hazeldean
Primary (Pretoria), Roodeplaat (Pretoria), Bankenveld (Witbank) and
Langebaan.
Prospects
EBITDA historically experiences some form of seasonality as enrolment fees
pick up in the second half of the year. It is therefore expected that profit
after tax will also improve as the capital injection from the rights issue
have been used to settle the majority of debt; the interest expense will as a
result reduce significantly over the second part of the year.
Commencing 2012, Curro will comprise of at least 14 school campuses with
approximately 7 500 enrolled learners, but capacity for 11 000 learners
without additional capital investment required.
In addition to expanding capacity at existing campuses, Curro plans to grow
by at least between 2 and 4 additional schools per year going forward. This
will be achieved through the development of own campuses which includes the
incorporation of smaller private schools as well as the acquisition of
existing private school institutions. The company`s strategic intent is to
establish a group of at least 40 campuses with 45 000 learners by 2020.
Shareholders are advised that to the extent that any statement in this
announcement constitutes a profit forecast, same has not been reviewed nor
reported on by the company`s auditors.
On behalf of the Board
JA le Roux CR van der Merwe B van der Linde
Chairman CEO CFO
12 August 2011
Directors
JA le Roux SC (Chairman)* CR van der Merwe (CEO) AJF Greyling (COO)
B van der Linde (CFO) MC Mehl ** PJ Mouton * B Petersen ** M Vilakazi **
(* Non Executive / ** Independent Non Executive)
Registered office
Suite 8, Monaco Square
14 Church Street
Durbanville
7550
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg
2001
PO Box 61051
Marshalltown
2107
Corporate advisor
PSG Capital
Designated advisor
Questco
These results are available on www.curro.co.za
Date: 15/08/2011 11:10:01 Produced by the JSE SENS Department.
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