Curro has to pull really big rabbit out of the hat, analyst says

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Curro's results for the six months ending 30 June 2021 shows revenue increased by 12.2% to R1.784 billion.
Curro's results for the six months ending 30 June 2021 shows revenue increased by 12.2% to R1.784 billion.
Supplied/Curro
  • Private education provider Curro announced its latest interim results on Wednesday.
  • Its profit took a large hit, and income from ancillary services - including bus services, aftercare, boarding facilities and the renting out of facilities – has declined.
  • Analyst Anthony Clark says Curro has been "over-aggressive".


JSE-listed education provider Curro will have to pull "a really big rabbit out of the hat" over the next 12 to 18 months to justify the market to move its price higher. 

This according to independent analyst Anthony Clark of Small Talk Daily.

Curro's results for the six months to end-June shows revenue increased by 12% to R1.8 billion. But headline earnings fell almost 28% to R116 million, and its earnings per share halved - due in part to a rights issue last year, which increased the number of Curro shares by 42%.

For Clark, Curro's latest results announced on Wednesday were "hardly anything to write home about". He expects a better performance from AdvTech, which is set to announce its latest results soon.

"AdvTech's share price has been running and the Curro share price is now lagging. I think this has now been the third or fourth year that Curro has materially let down the market with dismal earnings," said Clark. Curro's share price has lost 6% over the three months, and has been under pressure since its results were reported on Wednesday.

Curro's share price. Source: Google

"Yes, there was a Covid-19 impact, I will give them that. Yes, it is the impact of the R1.5 billion rights issue which had a huge diluting effect on earnings. But let's not forget, it was Curro's very over-aggressiveness that caused the debt to blow out. They admitted they put down too many schools and they were simply not filling them. They have now reined back that strategy and are now doing a better job at filling up the classrooms."

Curro invested a further R374 million into the business during the year under review, mainly to complete projects which were already scheduled to help expand capacity.   

"The primary objective for Curro remains to increase capacity utilisation of its existing facilities. We are on track with our overall capex programme to invest up to R1.1 billion in the business this year," said Curro CEO Andries Greyling.

Curro had 66 366 learners enrolled on 30 June 2021, representing a 9.2% increase in the previous year. (Average learner number take the average over all the months. Learner numbers can vary from month to month. For example, in January, when schools had not opened yet, the numbers were lower and then increased in February.)

Its income from school fees increased, but that from ancillary services - including bus services, aftercare, boarding facilities and the renting out of facilities – declined.

Debt

"Earnings of the previous year were predominantly recorded during the first half of the 2020 financial year, and we expect a more balanced distribution of earnings for the 2021 financial year," said Greyling.  

The levels of bad debt and fee discounts granted were also higher during the first half of 2020 than the company had experienced prior to the pandemic. Curro granted non-recurring discount relief of R60 million to its customers in the corresponding period due to the Covid-19 pandemic. If the Covid-19 discount granted in the previous year is excluded, discounts increased marginally to 9.1% of tuition fees from 8.8% in the comparable period," said Greyling.

The non-performing portion of the debtors book mainly relates to learners who have left Curro and concerted efforts are being made to recover these.

"The quality and ageing of outstanding accounts for enrolled learners improved during the first half of this year," said Greyling.

Curro's online-only school has more than 750 learners.

"Overall, however, our business model stays the same. The demand for growth, especially at high school level, is picking up, and predominantly for face-to-face education. We are not an online school predominantly and never will be," said Greyling.

Another option offered in the online space is where Curro learners at physical schools can opt to take certain subjects online if they are not offered at their specific school. 

The group's offerings include Curro, Curro Academy, Meridian, Select schools, Curro Castles, DigiEd, National Certificate Vocational education facilities, assisted learning facilities, as well as the fully online learning option. 

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