Curro Holdings: School arm Meridian slows profit

Bad debt figure up to 1.6% as recession and decline in disposable income weigh, says Curro CEO Andries Greyling.
Picture: Supplied

NASTASSIA ARENDSE:  Earlier on I spoke to the CEO of Curro Group, Andries Greyling, about the company’s interim results. They maintained revenue growth at 24%, but still with some losses that were contributed by its school arm Meridian, and also its tertiary education arm Stadio, which slowed down the profit. He started off by looking at the performance of the individual group segments. Here is that interview.

ANDRIES GREYLING:  If you break Curro up into the various units that we’ve got, you’ve got Curro, which is our main focus. Under our brands you’ll see the Select Schools – those are the ones that we manage as standalone units. And then you’ve got Curro, the traditional brand, the schools that we started with. And then our Curro Castles, the Embury schools, and then our Curro Academies, the new ones that we ventured into, starting in 2014. If you look at them on their own, the headline earnings for those units grew by about 47%.

And then you go to our next unit, which is the Meridian unit that we started in 2013 in a joint venture with Old Mutual, ring-fenced to six schools. That unit came under a bit of strain this year, mainly because it’s operating in rural areas and I think disposable income in those areas is under pressure.

And the third unit is Stadio. Stadio is going to list at the end of September. They’ve been managed separately, but they are still part of Curro until they list separately. Obviously for them it’s an investment period, setting up their structures, their systems and the exco – and, and, and. They also made a loss for the first six months.

Read: Curro to float tertiary unit in September

So if you take us as a unit, we grew from 22c headline earnings per share to 26.9c – about 22% growth.

NASTASSIA ARENDSE:  When you look at Meridian and Stadio, was it in line with expectations, considering the current environment that we are operating in? Or is it one these teething problems where eventually the light will shine in again?

ANDRIES GREYLING:  Stadio is all planned, and obviously we said as a separate business unit there will be some investment that you need to make. So that is a pre-planned one.

Obviously for Meridian we are all expecting growth and the biggest brand within Meridian is a school in Polokwane, Northern Academy, which consists of about 4 600 learners, [there’s been] a decline in learners at that school, because I think 60% of our learners there need to be in hostel as well as at school. The hostel numbers declined and you see those numbers falling through to your school. It’s mainly because of the area, where disposable income in a [climate of] economic pressure, as well as some competition in the area that started. We believe that we can turn it around and that next year we’ll start seeing growth again in that unit.

NASTASSIA ARENDSE:  Take me through, say, the strategy when you are sitting with your team around the boardroom table and you are trying to decide whether you are going to either build up or purchase one of the other schools. When you look at the area that you want to venture out in, what do you take into consideration?

ANDRIES GREYLING:  In the past, when Curro started, obviously we were quite gung-ho and the economy looked up and we started putting down a footprint all over South Africa. But from lessons learned over the years we realised that growth is happening in Gauteng and the Western Cape – and to a lesser degree in KwaZulu-Natal.

So if we do a greenfields, it would normally be only in Gauteng and the Western Cape, and then KwaZulu-Natal. And then obviously if you get an acquisition in any of the provinces that makes viable sense, we will obviously acquire.

So for us, our strategy has changed a bit. When we develop ourselves it will be in Gauteng, like I said, and then obviously we look at acquisitions wherever we can acquire them.

NASTASSIA ARENDSE:  I suppose it doesn’t matter which parent you speak to, the key concern is whether their children are getting a good education, whether it’s on a primary level or a tertiary level or whatever the case may be. When you look at the demand-supply dynamics, specifically for private education right now, how are you assessing that?

ANDRIES GREYLING:  I think the demand is being created for various reasons. The pressure is on you as academic operator; you need to make sure that you grow with your children and make sure you offer them quality, and make sure that your academic standards are up to scratch.

I think a lot of us venturing into the lower-fee market have different challenges, language being one. And the focus there is how to get your children to pass eventually in Grade 12, and not only just pass but pass with quality university exemption. We’ve learned those tricks over the years and we know how to focus and where to focus. So I think as long we focus on quality academics we can give parents what they expect back.

But your client is not always the parent. I think in most circumstances it’s your children, and it’s there for us we believe each child needs to be managed to grow within his or her capabilities, and live within that. So for us it’s a nice venture being in the education business and growing with our children and with our business.

NASTASSIA ARENDSE:  While on the topic of the education business, as a CEO, when you are looking at the current economic environment and the current political environment, what worries you while you sit with your team? What are the main concerns that specifically affect you?

ANDRIES GREYLING:  I think for us it’s obviously the recession, and I think a decline in disposable income. We can see it if we look at our bad-debt figure. It went up from 1 to 1.6% after November, which is not material, but you can still see there is an increase. I think for us it’s the pressure of that. We would love to give education to everybody in South Africa, and I think everybody needs to have quality education.

NASTASSIA ARENDSE: Andries, thank you so much for your time.

AUTHOR PROFILE

BUSINESS VIDEOS

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: