Curro wants to bounce back from Covid-19 and grow - this is its three-point plan

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Construction of the new Durbanville High School in Cape Town is due to be completed in 2021.
Construction of the new Durbanville High School in Cape Town is due to be completed in 2021.
  • Curro held its annual general meeting on Tuesday.
  • According to its CEO Andries Greyling, the independent education provider will focus on three areas going forward.
  • These are consolidation, expansion and opportunities.

Though JSE-listed, independent education provider Curro has been hard-hit by the Covid-19 pandemic, it has a threefold strategic focus going forward, its CEO Andries Greyling said during the annual general meeting on Tuesday.

Greyling said the impact of Covid-19 in 2020 included a reduction in learners, which weighed on income growth and a reduction in activity, which reduced ancillary income such as hostels and aftercare. The pandemic also caused the need to provide higher discounts and bad debts increased.

So, it has come up with a three-point plan to tackle these problems head-on. 

Firstly, it wants to consolidate the business where necessary, including limiting exposure to preschools and exiting non-profitable schools. It will focus on growing margin and return on capital and "being financially prudent by reorganising where required".

Secondly, Curro's strategic focus will be on expansion by means of capital allocation to grow schools, while limiting capital spend on underperforming schools. It will also invest in its digital offering to reduce the fixed cost base at schools.

The third part of its strategic focus is on opportunities. It will consider attractive opportunities, namely quality assets at attractive prices and with growth and cost-saving potential.

Learner growth under pressure

So far in 2021, despite strong learner growth, ancillary revenue remains under pressure. Greyling said consumers are still under financial pressure and Curro's ratios of discounts and provisions for bad debt are still above pre-Covid-19 levels.

In the 2020 financial year, which ended at the end of December, average learner numbers increased by 6% to 60 777, revenue increased by 5% to R3.094 billion, earnings before interest, taxes, depreciation, and amortisation increased by 1% to R686 million and headline earnings per share increased by 39% to 36.4 cents.

Learner numbers exceeded 66 000 at the end of February 2021 - the highest organic growth since 2015. There were record enrolments in February and March 2021. The total number of learners at the end of February 2021 was 66 153.

Other matters mentioned by Greyling included that construction of the new Durbanville High School in Cape Town's northern suburbs is due to be completed during 2021 to be able to have its first intake in January 2022. 

Last but not least, during 2020, Curro contributed R142 million to corporate social investment and bursaries. Its Ruta Sechaba Foundation grew to over 600 learners in the 2020 academic year, of which 60 learners wrote and passed the Grade 12 examination in 2020.

On Tuesday, Curro's share price was down 4.59% by late afternoon at R11.43 per share.

Curro's shares 'undervalued'

Regarding Tuesday's drop in share price, independent analyst Anthony Clark of Small Talk Daily said, all in all, the Curro share price looks undervalued compared to fellow independent education provider ADvTECH. Clark will not be surprised if - in due course - "people cast their glance over Curro and say, you know what, if you look ahead six to nine months, the story does not look so bad, it actually looks quite interesting".

Clark points to the fact that ancillary services have dropped off by about 32% and those services are very high margin and very lucrative to school companies like Curro.

"Services like busing children around, aftercare and hostels are things parents were willing to pay for, but during Covid-19 they cut back. Then, of course, there are the higher rates and taxes that slapped the company the last six months," said Clark.

Clark expects that Curro's interim results will not be great, but that for the whole financial year it will show a positive improvement. He pointed out that Curro expects good enrolment in 2022.

"And let's not forget that in this period during Covid-19 Curro had some of the best enrolments it has seen in many years, despite the net losses. The net gains were still the best organic growth that Curro had seen in many years." 

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