Curro sees profit growth boosted by pupil growth, higher fees

FIFI PETERS: More parents are taking their kids to Curro to learn, it would seem, because the private education group, which has around 181 schools across the country, reports a 31% jump in its first-half profits. It said that was boosted by an increase in learners. So, as of August 1, the first of this month, Curro said it had over 71 011 learners across its schools.

We’ve got the CEO, Andries Greyling, on the Market Update for more. Andries, thank you so much for your time. It looks like ‘business as usual’ has returned to your classrooms once again. How would you describe the first six months of the year?

Dr ANDRIES GREYLING: Thank you. The first six months was amazing – just to experience the schools being active again, and experiencing the energy. Our learners really excelled over the last six months, not only academically, but [with] a lot of learners getting gold in various expos, participating on behalf of South Africa at various sports and cultural events, and just being active. You can see the learners’ energy flowing out of our schools again.

So this part of the year [was] a bit slower with still not being able to market into the rest of Africa, and our boarding facilities are not at capacity, as they were pre-Covid.

Then we’ve still a bit of a higher bad debt than we were hoping for but, that said, for us as a group, [we] can now start making decisions again on better facts in front of [us] and data in the last two years to try and determine what’s going to be the next step. How things are going to play out [is] always difficult because you never know [whether] you’re going to be open or closed or how many learners you are going to have or not have, and what cash is going to come in and not come in.

But I think we are over that period and we can now focus on announcing our product offering and filling our schools, which is quite exciting for us.

FIFI PETERS: So what’s that data saying that you’re looking at right now, and what kind of decisions are you thinking of making?

Dr ANDRIES GREYLING: For us the first phase of existence was to just put down our campuses. I think we went in aggressively. Like you said, 77 campuses, 180 schools. We went in and established [inaudible] in southern Africa, one in Namibia and one in Botswana. We put down the infrastructure and we now need to grow our facilities. A lot of our facilities still need classrooms.

So the big focus now is we’ve got about 6 800 Grade 8s, and 3 500 Grade 12s. If we can maintain the intake of our Grade 8 learners, you can imagine that rollover into Grade 12 needs to happen. And for that we need infrastructure and facilities.

So it also shows us that our parents are waiting a bit longer, maybe because of the economy, keeping their learners in the primary school still at public sector, [to then] join us in the high school.

So our focus now is to increase our utilisation and ensure that then enhances our profitability and makes sure that we deliver quality at each one of our schools.

FIFI PETERS: Talking about parents, how are they holding up in this environment, because we are in a cost-of-living crisis right now? The price of everything is going up, including the price of your tuition rising just over 13% this time around. How are parents holding up?

Dr ANDRIES GREYLING: Let’s say the tuition, part of it is an increase in learner numbers of about 7%, as well as an increase in your ancillary revenue of about 20%; so the fee increase is inflationary for this year. What we are seeing is our bad debts were really big in 2020 and into 2021 as well. And they are holding at the same number as a percentage of our revenue, close to 4%, which is higher than what it was pre-Covid.

[There are] two reasons for that – obviously still the Covid effect on parents that lost their jobs, as well as now the pressure on the consumer having less disposable income.

That said, parents are still paying for education, we just had to adjust our business model and ensure that we build in the higher bad debts. But, like you said, we’ve a 7% increase in learner numbers which for us is a good thing, and hopefully we can continue growing into next year.

FIFI PETERS: A lot of financial advisors and planners in this environment are telling us we need not be afraid to downgrade our lifestyles to save as much as we can and cut costs. I’m wondering if you’re seeing that in your schools – parents downgrading their private education and taking their children to public schools because the environment is tough. How many learners would you say you’re losing?

Dr ANDRIES GREYLING: Luckily for us, we’ve got various price points. So we’ve got our ‘select’, which are a bit higher fees, our ‘Curro Traditional’ which is a mid-fee. And then you’ve got your academies and your Meridians and the DGX schools, which cater for a wider range of clients. What we’ve seen over the last year is there are about 4 000 learners [who] move between our campuses. It’s not all from a higher fee to a lower fee. It can also be from a lower fee to a higher fee.

So luckily within our group we’ve got those options, so when parents love your brand they can move within your schools if they start to afford a certain price point, then downscale for a while, and then maybe come back at the later point. So that is rewarding for us to see in the way that we position ourself.

Yes, obviously if parents struggle the option will be to go back to the public sector. Over the last year or two, and even before Covid, [inaudible] rate, what it is at the moment, is more or less the same. So we haven’t seen a dramatic increase because of the consumer being under strain. I think that the product we offer and parents’ [willingness] to pay for education and maybe not go out for dinner or something like that, or buy a new car, but rather pay for school fees.

FIFI PETERS: Yes. It’s necessary. It promises a brighter future for most people, although not for all right now, just because of the economy.

But I want to talk about the subsidy you got from government, the one that you describe as being ‘long overdue’, of R25 million. How material was this for your business and why did it take so long?

Dr ANDRIES GREYLING: It’s a Meridian school. So when we bought the school in 2013, the school received a subsidy from the government. That enabled us to keep the fees lower. The subsidy is based on your school fees. So the lower your school fees, the more your subsidy will be. We are writing a national exam at that school, and when Curro took over in 2013 the subsidy was stopped. So we debated it with the provincial government and later on decided to make it a legal action and try to understand why we [were] not getting it. I think the business model was based on it, and it also helped us to keep fees low for our parents, and not to increase.

After a long battle we won, and I’m glad to say that the department [is] going to settle the outstanding fees from 2013, and hopefully it can now become part of our model for years to come.

FIFI PETERS: Andries, we’ll leave it there for now, sir. Thanks so much for your time. Andries Greyling is the CEO of Curro.