JSE-listed South African private schools operator Curro Holdings has slammed the door on new acquisitions, with executives at the company saying they prefer to raise dividends in the medium term as well as revamping the current portfolio through a R2.8 billion capex spend over the next three years.
Curro yesterday reported a 34.7% rise in recurring headline earnings, which amounted to R330 million for the year to end December, 2022 while headline earnings per share quickened by as much as 50% to 61.4 cents per share over the same period. It resultantly paid a final dividend to be drawn down from income reserves for the period of 11.08 cents per share.
Despite of this robust financial performance, CEO Cobus Loubser told investors in the company after its annual results presentation yesterday, Curro Holdings would not pursue any new acquisitions.
“We would seek to increase dividends in the medium term. We will focus on the portfolio we have before we embark on the next phase of expansion growth,” Loubser said in response to analysts and media questions.
The company’s shares on the JSE slumped 2.74% to trade around R8.51 yesterday afternoon, while it was 2.78% down in the year to date comparative.
Although the company was not seeking acquisitions of new schools in the medium term, it was geared to “invest R2.8bn on capital expenditure” for the period 2023 to 2026, Loubser said.
About R800m of this would be expended on maintaining, expanding and replacing existing facilities in 2023.
The company would also seek to capitalise on digital options as a way of avoiding “drag” on its learner-to-teacher ratio, which currently stands at 17.7 per teacher.
“I am cautious; we need to appreciate that if we add learners that will be a drag on learner/teacher ratio. We are looking up to the digital space to empower learner journey and the pace of investment will be determined by the volume of learner growth,” added Loubser.
In the year to December, Curro recognised impairments of R127m relating to some lower-yielding schools. It, however, generated R800m cash from its operating activities during the year, an increase of about 4% over the earlier year.
The company benefited from tuition fees increases of about 14.1% as a result of “growth in learners and annual fee increases”, which it said were “ahead of inflation” across its portfolio of schools. It had to put more learners out of its schools compared to 2021 because of bad debt, with its overall enrolled learners standing at 73 000 as at February 20, 2023.
This all lifted revenues by 17.3% to R4.2bn, supported by an increase in ancillary revenue, which was R96m and 36.1% higher than the previous year. Moreover, “the level of extracurricular activities normalised gradually” during the year under review.
Curro Holdings had to install electricity meters at all its facilities to track consumption and manage behaviour; it acquired several large diesel generators to provide back-up power where most required and evaluated battery and solar solutions to be able to generate and store enough electricity in dealing with worsening power outages.
“We will continue to invest in back-up power solutions in 2023 to mitigate our operational risk and reduce energy dependency and cost over the long term,” the company said.
Other headwinds emanated from higher interest rates and the impact of inflation on the cost of food, fuel and electricity which worked to suppress consumers’ disposable incomes amid expectations by Curro management that this will continue in 2023.
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