DR CHRIS van der Merwe is CEO of Curro Holdings.
SUMMIT TV: Curro Holdings will be going ahead with another rights offer, this time aiming to raise just over R600m to fund much faster than expected growth, and released its year-end results. This is another rights offer and the market loved the news. Are you not growing too fast here, that you have to go to market yet again to raise capital?
CHRIS VAN DER MERWE: I think there’s a lot of great opportunities out there — as I mentioned previously to the market, we will always embark on good opportunities, and we do that with a combination of funding that includes equity from the market.
STV: What’s the indication been from institutions? You’ve traditionally had a very strong retail shareholder base, and I know you want more institutions buying into the Curro story — have they been buying in and do you expect them to take up this rights offer?
CVM: We have been doing quite a lot of interviews with particular institutions — especially since we listed on the main board and since our statement that the schools are growing according to the prelisting statement and even much better, we believe that we will get a couple of institutions to invest.
STV: Can you give us an idea of what the breakdown is between retail and institutional shareholders at the moment?
CVM: Currently PSG is our biggest stakeholder at approximately 58% and then there’s Thembeka Capital owning about 10%. And then if we look at the institutions that have invested, they are also at around 10%, the rest obviously being individuals from the marketplace.
STV: You mentioned, in the results that you’ve released at the same time as the details of the rights offer, that the Development Bank of Southern Africa (DBSA) is going to be funding you to the tune of R150m and that you’ve embarked on a domestic bond-raising programme. If you have these other options, why do you have to go to the market to raise this capital? Is it because you need the cash immediately and the other two options are a bit slower in coming to fruition?
CVM: I don’t think it’s a case of going out to the marketplace with bad news — it’s quite the opposite. To give you an indication, we have completed building five new schools in 2012 and they all opened with record numbers, and we have more than 10 opportunities for 2013 so we believe we are going to build 10 new schools. If we build one new school that’s R40m-R50m so if there are opportunities we will pursue that. One must understand that to construct a school is quite a costly exercise and that’s why one needs a combination of funds from the equity market and also from the banks, until one makes enough cash to construct schools without having to go to the marketplace. We believe that is not far off and in two years we will be in that situation.
STV: You have about 26 schools now with 20,840 learners and you talked about opening 10 new schools this year — it sounds like you’ve been quite successful in finding sites to build new schools, because I would have thought that could be quite challenging?
CVM: We never anticipated that we’d be at this stage just 18 months after listing. Just to give you an indication, in 2011 we had 5,500 children and just one year later that was 12,473, and as we are speaking now we have 20,840. To answer your question, the opportunities just keep on flooding in and obviously there is great synergy between us and the developers, where if we build a school they can sell their residential stands and that is working for us.
STV: What is the ratio of teachers to learners? Obviously you want to offer a decent education service — has that changed in the past few years, given you’ve added so many learners into your schools?
CVM: Let’s take a look at the various brands. Obviously in the traditional Curro schools the ratio between teacher and learner in the primary schools is about 1:25 and the same for the high schools, but the moment we speak of a high school there are subject choices so the ratio technically comes down to about 1:17. Then obviously we have presented to the marketplace our low fee schools, where the ratio is 1:35. We really do not battle to get teachers — if we advertise a post we get more than enough applicants to make good choices.
STV: Getting onto the results: you posted positive headline earnings per share of 7c against a loss of 5.4c last time around — is this the start of a positive earnings trajectory for Curro?
CVM: We believe so. If you take a look at the 2012 results where we made almost R50m in profits after tax with 12,473 children; bear in mind we improved our results on an annual basis by more than R20m so there is a positive movement, from minus R7.4m to plus R14.67m in one year. That we established with 12,000 children and as I mentioned we have now enrolled 20,840 learners so if one does the basic calculations that curve is now turning very positive indeed.
STV: What is the trajectory likely to be in this financial year? How many learners do you anticipate signing on with the new schools you plan to open?
CVM: We believe that we have improved this number approximately 20% year on year so if you look at our existing schools we believe that number can go up approximately by 4,500 children. We spoke about 10 opportunities that we would like to complete — meaning new schools this year — and with those new schools we believe we will succeed in getting an intake of another 4,000 children. The chances are good we will up that number by about 8,000 children. Just to give you an idea, normally we open a school with 200-300 children but, just to mention one example, we opened one of our five new schools in Centurion called Curro Thatchfield and they opened with 800 kids on day one.