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Curro grows learner base by 16%

The company has made investments worth R1.2 billion with a specific focus on Gauteng.

NOMPU SIZIBA: Independent school operator Curro released its annual results today for the 12 months ended December 2018. The company reported revenue up 23% to R2.5 billion. Ebitda rose by 33% to R627 million. Meanwhile, headline earnings from continual operations increased by 23% to R248 million. And, on a per-share basis, headline earnings came in at 60.1 cents. The company has decided to disburse a maiden dividend to shareholders of 12c per share.

To tell us what’s happening at the company I’m joined on the line by Andries Greyling, the CEO at Curro. Andries, your headline numbers are looking healthy, and I see you have managed to grow your learners at your Curro schools by 16% to just under 42 000. Tell us about that.

ANDRIES GREYLING: If you look at Curro as a whole, we had a brilliant year, growing our earnings per share by 25% which, in a difficult year and I think a difficult economy, was a good year for us. So we were quite happy with the 2018 figures.

You then go into this year, at the start of 2019, and look at our learner numbers. As you are aware, we have four brands. So we see the Curro Academies, the Meridian, the Castle and then the Select schools, we are quite happy to say that in total our schools grew by 12% from 2018 to 2019 – the Curros and the Academies a bit more than the rest. But organically we grew by about 7% and we also had new acquisitions which added to the numbers. And then some of our greenfield [investments] added as well. So we are quite pleased at growing by 12% into 2019.

NOMPU SIZIBA: Just tell us a bit about your Meridian business. What does it do, and why was there a slight decline there of about 4%?

ANDRIES GREYLING: The Meridian business is a venture that we started in 2013 with Old Mutual; out of that Curro Academies was born. They are playing purely in the lower-end, lower-fee market. The Meridians have seven campuses and they are more in rural areas like in Polokwane, Nelspruit and Rustenburg. Where the economies in areas are going through difficult times that model will be under some pressure. But we stabilised it and we saw some ebitda growth in Meridian, even though the numbers have been under pressure.

NOMPU SIZIBA: At an academic level you report that your 2018 Grade 12 learners achieved Independent Examination Board or IEB passes of 99.7%. What are Curro’s guiding principles that you feel are enabling your schools to achieve this kind of academic excellence?

ANDRIES GREYLING: We are following two models. Our Curro and our Select schools write the IEB exam; that’s more in your higher/mid-fee market. And then our Meridian Academies, which are the schools in the lower-fee market, situated more in the townships, do the national exam. So what we’ve done over the years is to invest a lot of money into the quality of our curriculum. You can’t wait until Grade 12 to determine the quality at a school, so we have systems in place where our youngsters from the Grade R level up to Grade 12 have teachers who follow a specific curriculum, monitored by a team at head office. They make sure that help is there if help is required, and move in an assistant teacher, making sure learners are exposed to the correct standard of education, quality of exams, and so on.

There is also a huge amount of development into new world trends, which include Robotics, Coding, Drone Flying – all those nice things that become part of life these days.

I’m really proud of our results in both the exams – the IEB and the national exam. In the national exam we had a 94% pass rate, which for us is brilliant.

NOMPU SIZIBA: Clearly your scholar numbers are growing and, with that, what’s your average teacher: learner ratio like? Presumably that is something that you would be keen to keep an eye on?

ANDRIES GREYLING: As you open new schools you will have lower ratios, since a school needs to grow into maturity. Currently that’s standing at a 17:1 ratio. Obviously you want to get that up, but that will grow only as the schools reach maturity. Each year we are adding new greenfield acquisitions into the mix, and that will always distort your figure because the older schools will show other ratios, and the younger schools will have still lower ratios. You could perhaps look at a Grade 7 class of eight learners in your first year. So, you will still grow into maturity.

NOMPU SIZIBA: You did touch on it – there is a lot of talk these days about the Fourth Industrial Revolution and whether the broader national education system can get with the programme and ready our children for the future. I see that last year you did invest in a tech school, which speaks exactly to this future, with a focus on Mathematics, Science, Robotics and Coding. How much interest have you had [expressed] in that particular school, and is this something that you plan to integrate into your existing schools in the near future, as obviously not everybody will want to attend a specific tech school?

ANDRIES GREYLING: We started two models this year. The one is the tech one you are talking about, and then the National Vocational Certificate, where we focus more on a specialised industry, like finance or IT, where a learner in Grade 10 will go into that specific direction earlier, rather than following a purely academic side. That creates a benefit for a learner, who does not need to pass two languages which a lot of learners fail; they need to pass only one language, Grade 12 English or Afrikaans. You can’t do any of the other languages.

We were quite surprised with the uptake. We opened this new model at Foreshore, and we currently have over 40 learners. We had planned to have only one class of about 30, so the demand and the take-up was quite high.

Are we doing this in our current schools? There is a lot of the technology and 21st-century teaching – deep learning, Robotics, Coding – happening in our current schools as well. But this one is a bit different, where you give the children more access to pre-recorded lessons, and there is more group work involved than at the other schools. So we are gradually integrating them one with another.

NOMPU SIZIBA: Right. I see in terms of growth and investment you did make some investment – correct me if I am wrong – of about R1.2 billion. There was quite a bit of focus on Gauteng. What are your future plans for growing the Curro business?

ANDRIES GREYLING: What we said to the market is that we will focus for greenfields specifically in Gauteng, the Western Cape and KwaZulu-Natal, because we see the biggest demand there. Then if we do acquisitions we’ll do them in the rest of South Africa. We will even buy what we can acquire in Gauteng.

Last year we had a massive year, if you look at the number of campuses that we added to our group. Looking forward we still foresee this year adding another nine campuses to our group – to open in 2020. We are currently at 68 campuses and hopefully next year we will open with over 75.

NOMPU SIZIBA: Andries, any concerns about your margins going forward, as household finances are under pressure in this lacklustre economy? And when it comes to raising fees, any worries that getting decent increases may be tricky?

ANDRIES GREYLING: Obviously one reason why you see leavers within your group is because of financial constraints. It would be arrogant to just ignore that. For us it’s obviously [critical] to make sure that you offer value in your product, making sure that it stays affordable for parents, and being responsible when we do increases. If you look at education inflation, that’s way past normal inflation. So what we are currently doing whenever we look at increases is to determine per school where we are, and where that school is situated and how comparable the fees are. We don’t adopt a blanket approach for all our schools. We specifically look at increases individually, per grade. We will continually look at that and make sure that we stay competitive with our prices.

Playing in the mid-fee range in private education gives us a bit of scope, because our fees aren’t in the R10 000, R12 000 a month range of fees. We pitch more in the R4 500 range.

NOMPU SIZIBA: Thanks to Andries Greyling, CEO at Curro.

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The return on capital is still VERY poor and IMO will remain so : the nature of schools. The colleges and universities that do very well did so off endowments. So if an alma mater gives $25m for an auditorium with his name, great. If Yale or Harvard had to spend the $25m, different story.

End of comments.

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