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Curro: Heps up from R100m to R169m

FY results. ‘We don’t have to go out there with yet another rights issue’ – Chris van der Merwe, founder and outgoing CEO – Curro Holdings.

SIKI MGABADELI:  Listed private education group Curro boosted profits by a massive 83% in the past financial year, as its number of registered learners approaches 50 000 and they added 26 more schools to their roster. In the full year to end-December Curro reported a 69% increase in headline earnings to R169 million – that’s up from R100 million in 2015. Revenue was up 27%, ebitda up 33% and their profit for the year up 83%.

So let’s chat to Dr Chris van der Merwe, who is founder and CEO of Curro Holdings. Thanks so much for your time today.

CHRIS VAN DER MERWE:  It’s a pleasure and thank you for the opportunity once again.

SIKI MGABADELI:  I was just chatting to David Shapiro, and saying to him we’ve been spending so much time celebrating increases of say 5%, 6%, in headline earnings in many companies because it is a tough economic environment, so it’s nice to see double-digit growth of this magnitude from you guys.

CHRIS VAN DER MERWE:  We are incredibly thankful because obviously we are also very, very sensitive about the macroeconomic situation in our country. But, despite the fact that it’s tough out there, we posted a 14% increase in terms of our learner numbers, which is good.

Look, this is the sixth year that we communicate results – and thankfully every year we’ve hit our targets. So in terms of annualising the demand, we are still very optimistic that we will have 80 000 children towards the end of 2020, going into 2021.

SIKI MGABADELI:  How many new schools will that entail then, and how much spending?

CHRIS VAN DER MERWE:  Last year we had 109 schools. This year we opened with 128 schools, so we are heading for 200 schools by 2020, or 80 campuses because, remember, there is a pre-primary, a primary and a high school on each campus. And we’ve earmarked R800 million to expand existing campuses. The rest will be used for greenfields and maybe an acquisition.

SIKI MGABADELI:  Okay. So where is the funding going to come from?

CHRIS VAN DER MERWE:  Thankfully our balance sheet is very strong, and we don’t have to go out there with yet another rights issue. So that also shows that the business model is working according to plan. In terms of our balance sheet we have cash in hand. And obviously, because our gearing is very low, we can also get some money from the bankers.

SIKI MGABADELI:  Okay – so 200 schools, campuses…

CHRIS VAN DER MERWE:  By 2020.

SIKI MGABADELI:  Is demand there? What do you think is driving that demand – that you can catch that many pupils by 2020?

CHRIS VAN DER MERWE:  This is the ninetieth year of our existence, so surely the brand is now well renowned. If you had asked me when I opened the school with 28 children in a church whether this would happen, I could never have thought it in my wildest dreams. Nevertheless what’s happening now is Curro has become a domestic name and, if the moms and dads actually go through their lists of options, one can bet Curro will be one of the options. I think that makes marketing easier. So yes, the demand is definitely there.

SIKI MGABADELI:  University – let’s talk about that particular division. There have been lots of developments there as well and you are thinking of separately listing it.

CHRIS VAN DER MERWE:  I’m extremely positive about our tertiary movement. As you picked up in all the media reports today, it also implies that I’m changing my career path. I’ve been working very diligently in terms of training and retraining our youngsters to guide Curro, and they’ve been doing it now for 24 months. These are a lot of CAs. They are very, very intelligent and a bit younger than I am. So PSG’s argument – and they are the main shareholder – is that I’ve obviously learnt a lot of lessons in the 19 years since we created Curro, so logically one can utilise my expertise and all the lessons I’ve learnt to establish this tertiary component.

And obviously because it’s not going to be one company any more I can’t become group CEO. So technically, in terms of King IV, I have to be a chairperson on the one side and a director on the other side, but acting as strategic advisor.

We see a market of 100 000 tertiary students over time. We are very, very confident that there is alignment between the Curro model and the tertiary companies model in terms of property development, but also in terms of curriculum development. So we are extremely positive that we can once again work adjacent to the state and literally widen access also to accommodate children. Did you know there are 50 000 Grade 12s who actually don’t get access to our universities? Now, their marks are good, they qualify, but they are not the top achievers, and they just don’t get placement. So we are sticking our hand in the air and saying, well, we’ve shown the country that Curro can work adjacent to the state and help out the country in terms of widening access, and we will attempt to do the same in the tertiary space.

SIKI MGABADELI:  We wish you luck. Thank you so much.

CHRIS VAN DER MERWE:  I thank you.

SIKI MGABADELI:  It was my pleasure to talk to you. That’s Dr Chris van der Merwe, who is founder and CEO of Curro Holdings.

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