MARC HASENFUSS: A problem at Curro
Is a break-even situation the best Curro shareholders can hope for?
Shares in Curro Holdings were not enthusiastically marked up after the release of much-improved profit growth numbers in the half-year to end-June. On a year-to-date basis the share price is about 30% lower, though the p:e remains at a demanding 48 on a forward basis. While the J-curve growth trajectory looks fairly convincing in Curro’s main body of affordable private schools, there may be worries about prospects for low-fee subsidiary, Meridian. It accounts for about 11% of Curro’s revenue and just 6% of earnings before interest, tax, depreciation and amortisation (ebitda). But it causes a drag on earnings and will continue to do so until Curro’s mainstream offering grows much bigger or Meridian turns around. While some may feel Meridian is a philanthropic exercise, it might be disconcerting for some Curro shareholders that a hefty recapitalisation effort is under way. Curro, as a 65% shareholder, aims to redeem "expensive" interest-bearing debt of R390m. This means Curro will inv...
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