Curro Holdings Limited (COH) Earnings Call Transcript

Good afternoon, ladies and gentlemen. My name is Themba Baloyi. I'm the Chairman of the Board of Directors at Curro. It is an honor and pleasure to welcome you to the 2025 Annual General Meeting of the shareholders of Curro. 2024 was a year of exceptional achievement across Curro. Our learners shone in academics, sports and culture. Most notably, Bayanda Walaza of Curro Hazeldean, who won a silver medal at the Paris Olympics as part of South Africa's 4 by 100-meter Relay team. Curro's purpose is clear, and we remain firmly committed to delivering exceptional education across Southern Africa. This is the most transformative and noble essential investment we as Curro are making into a better future for Southern Africa. Our values, especially excellence, continue to guide us in scaling our impact and building long-term sustainable growth. Despite a challenging consumer environment, Curro delivered a strong financial performance. Revenue rose by 8% to ZAR 5.1 billion and a final dividend of ZAR 0.166 per share was declared, which was up 13% from 2023, reflecting a confidence in our financial strength trajectory and a deep commitment to value creation. In 2024, we expanded our reach with new campuses in Walvis Bay, Oshana and Barlow Park. With ZAR 866 million in cash generated and up to ZAR 660 million earmarked for 2025 capital investment projects, we are well positioned for continued disciplined expansion. As your new Chairperson, I'm honored to lead during such a dynamic and promising time. I extend my sincere thanks to the Board, our executive directors leadership, CEO, Cobus Loubser; Deputy CEO, Mari Lategan; and CFO, Burtie September, and every Curro employee for their dedication. I also thank our learners, families and partners for their ongoing support and trust. Looking ahead, we will stay focused on academic excellence, innovation and strategic growth to reinforce Curro's position as a leader in independent education. Thank you, which brings me to the matters of today. As a forum of members is present and notice of this meeting has been given in an appropriate manner, I declare this meeting properly constituted. I confirm that we have sufficient voting rights present at the AGM to vote on all resolutions. The notice convening this meeting was published on the SENS on April 29, 2025 and mailed to the shareholders, allowing sufficient time for members to peruse the contents thereof. I propose thereof that the notice be taken as read. Procedure for voting. Voting in respect of this meeting shall proceed by way of a poll. Such voting shall be conducted electronically as contemplated by the Companies Act and the MOI of the company. Computershare is providing this service. For the purposes of the poll, I nominate a representative of Computershare present at this meeting to act as Scrutineer. We will open the voting on all resolutions now to enable you to vote at leisure whilst I read through the resolutions. You'll be able to send questions and view the webcast whilst the poll is open. To vote, simply select your voting option from the options shown on the screen. A confirmation message will appear to show your vote has been received. To change your vote, simply select another option. If you wish to cancel your vote, please press Cancel. Select For if you agree, select Against if you don't agree or select Abstain if you wish to abstain. If you wish to ask questions, select the Messaging icon, tap your message in the chat box at the bottom of the Messaging screen and then present. I will allow for questions after I have read all the resolutions. We'll then close the poll after questions have been answered and display the results on the screen. The Companies Act requires that audited annual financial statements, including the directors' and audit committee reports be presented at this meeting. A summary of the financial statements has been distributed to shareholders while the annual integrated report is available on the Curro website. Cobus Loubser, CEO of Curro, will do a short presentation at the end of the AGM. The Companies Act also requires a member of the Social and Ethics Committee to report on the affairs of this committee. A report by the Chairperson of the Social Ethics and Transformation Committee of Curro, Ms. Lerato Molebatsi, on behalf of the committee is included in the integrated annual report. Now let's start with the resolutions. We require you approval for the following ordinary resolutions. In order to avoid unnecessary repetition, Cobus Loubser has agreed to be the seconder for all resolutions placed before the meeting. We'll start with ordinary resolution 1 to 3, which relates to the directors who are retiring by rotation in terms of the MOI. Ordinary resolution number one. Reelection of Douglas Ramaphosa as a lead independent nonexecutive Director of the company. Douglas is available to serve. His photograph is displayed on the screen. Douglas has over 35 years of business experience at an executive management and Board level. He is the Founder and Chairman of the Riashuma Group and also serves on the Board of 4SIGHT Holdings. He chairs the boards of the newly established Johannesburg Surgical Hospital as well as BMG Pharmaceuticals (sic) [ BGM Pharmaceuticals ]. He has served in senior aggressive positions at Altron, Transnet, ABSA and Anglo American and was the CEO of Bytes Healthcare Solutions. Douglas is a highly respected and valuable member of the Curro Board. Please vote now. Ordinary resolution #2, I will ask Cobus Loubser to read through this resolution.

So ordinary resolution #2 is the reelection of Mr. Themba Baloyi as an independent nonexecutive director. Themba is available to serve and his photograph is displayed on screen. Themba was appointed as an independent nonexecutive director to the Board on November 1, 2020. He studied cost and management accounting and corporate governance through ICSA and as an executive from the Henley Business School. He completed business leadership studies through the Gordon Institute of Business Science at the University of Cape Town Graduate School of Business and Duke University. Themba is an innovative and entrepreneurial business leader who founded Discovery Insure, a short-term insurance company launched in 2011. The Discovery Insure work propelled him to win the 2018 CNBC Africa All Africa Business Leaders Entrepreneur of the Year Award. He was honored as a 2015 World Economic Forum Young Global Leader, and he's a fellow of the Aspen Institute Global Leadership Network and is the Chairman of the Allan Gray Orbis Foundation and the Board member of CalgroM3 Holdings, amongst others. Please vote now.

Thank you, Cobus. Ordinary resolution #3, reelection of Mr. Piet Mouton as an independent nonexecutive Director of the company. Piet is available to serve. His photograph is displayed on the screen. Piet is the Chairman of the PSG Group Ltd and serves as a nonexecutive director on the Board of various companies. including Capitec Bank Holdings Ltd, PSG Financial Services Ltd and Zeder Investments Ltd. He has worked and served on boards in investment and financial services industries since 1999. Piet is a much respected member of the Curro Board. Please vote now. Ordinary resolution 4 to 6 relate to the reappointment of members of the Audit and Risk Committee. I'll start with ordinary resolution number 4, reappointment of Ms. Cora Fernandez as a member and Chairperson of the Audit and Risk Committee of the company. Cora is available to serve. Her photograph is displayed on the screen now. Please vote now. Resolution #5, reappointment of Mr. Douglas Ramaphosa as a member of the Audit and Risk Committee of the company. Douglas is available to serve. His photograph is displayed on the screen. Please vote now. Ordinary Resolution #6, reappointment of Ms. Busi Mathe as a member of the Audit and Risk Committee of the company. Busi is available to serve. Her photograph is displayed on the screen. Please vote now. I will move on to ordinary resolutions #7 to 10, which relate to the reappointment of members of the Social, Ethics and Transformation Committee. Ordinary resolution #7, reappointment of Ms. Lerato Molebatsi as a member and Chairperson of the Social, Ethics and Transformation Committee of the company. Lerato rate is available to serve. Her photograph is displayed on the screen. Please vote now. Ordinary resolution #8, reappointment of Mr. Douglas Ramaphosa as a member of the Social, Ethics and Transformation Committee of the company. Douglas is available to serve. His photograph is displayed on the screen. Please vote now. Resolution #9, the reappointment of Dr. Chris van der Merwe as a member of the Social, Ethics and Transformation Committee of the company. Dr. Chris is available to serve. His photograph is displayed on the screen. Please vote now. Ordinary Resolution #10, reappointment of Mr. Cobus Loubser as a member of the Social, Ethics and Transformation Committee of the company. Cobus is available to serve. His photograph is displayed on the screen. Please vote now. Ordinary resolution #11, the reappointment of PwC Coopers Inc. as auditors of the company with a designated lead auditor partner being Ms. Rika Labuschaigne as registered auditor and partner in the firm on the recommendation of the Audit and Risk Committee of the company. Please vote now. Resolution #12, general authority to issue ordinary shares for cash. Please vote now. Note, at least 75% of the shareholders represented by proxy and entitled to vote at the AGM must cast their vote in favor of this ordinary resolution for it to be passed. The following 2 resolutions relates to the remuneration policy and the implementation of the policy. In terms of King IV, 75% approval from shareholders is required, following which the company will engage with shareholders on its remuneration policy and its implementation. Ordinary resolution #13, a nonbinding vote -- advisory vote on Curro's remuneration policy. Ordinary resolution #14, nonbinding advisory vote on Curro's implementation report of the remuneration policy. Please vote now. We require your approval for the following special resolutions. And note, for the special resolutions to be adopted, at least 75% of the voting rights exercised in each special resolution must be exercised in favor thereof. Special resolution #1, approval of remuneration payable to nonexecutive directors. Please vote now. Special resolution #2, general authority to provide financial assistance to related or interrelated companies. Please vote now. Special resolution #3, general authority to provide financial assistance for the subscription to or the acquisition of securities in the company or a related -- interrelated company acquisition of shares. Please vote now. Special resolution #4, general authority for the company and its subsidiaries to repurchase shares issued by Curro. Please vote now. Special resolution #5, amendments to the company's Memorandum of Incorporation. Please vote now. That brings me to the end of all resolutions. I will now allow time for questions before we close the overall voting. If you have a question, select the Messaging icon then type your message in a chat box at the bottom of the Messaging screen and then press send.. Cobus will now read the questions and direct them where required. Over to you, Cobus.

Thank you, Chair. We do not have any questions yet.

Give it a minute or two. If there are no further questions, I would like to proceed. Voting on all the resolutions is now closed. The Scrutineer will now provide the results of the voting. Ladies and gentlemen, the results of the poll are presented on the screen. All ordinary and special resolutions have been passed with the requisite majority. I would like to thank you for attending our AGM and for your interest in our company. I now declare the AGM closed, and I now hand over to Cobus Loubser, CEO of Curro, who will do a short presentation.

Thank you, Themba. Yes, good afternoon, ladies and gentlemen. My name is Cobus Loubser, and I'm very proud to be the CEO of this outstanding organization. Curro has a profound mission, and that is to make independent education accessible and available to as many learners as possible in Southern Africa. So thanks for joining us at the AGM today. I'm going to briefly review 2024. I'll spend a bit of time on three aspects, which I've summarized on the growth momentum and which I think underpins Curro's investment thesis. And we will then really just explain the strategic focus and emphasis of this management team. 2024 was truly a remarkable year for Curro, and I'm very, very proud of our learners and, of course, of our staff for their guidance. We recorded our most successful year in every respect in terms of metric results in a wide range of sports participation and achievements and record participation and cultural activities as well as community involvement. Curro truly creates opportunities for our learners, and schools are ambitiously expanding both the academic and extramural activities to prepare versatile learners for bright futures. Our commitment to excellence in education remains at the heart of everything that we do. And in 2024, this commitment translated into new milestones across academics, sport and culture with impressive financial resilience in a challenging economic landscape. We are driven by our core belief that every child matters. And this belief guides us and it inspires us to provide accessible, high-quality education to learners. Curro's business model balances social purpose and investor returns while maintaining a steadfast focus on learner success. The 2024 integrated report deals extensively with our activities pertaining to sustainability, social, ethics and transformation. Curro is passionate about making a very positive impact in society. And over and above our core education service to more than 72,000 learners, we contributed ZAR 147 million to corporate social investment and bursaries for the year ended on the 31st of December 2024. We participate in a broad range of social projects, and we are particularly proud of our collaboration and association with the Ruta Sechaba Foundation. The foundation is a long-standing public benefit organization, which works closely with various companies to identify and to support talented learners. These partners provide scholarships and bursaries, which are managed through the foundation. And current partners include Exxaro, KFC, Capitec, PSG Financial Services and various others, to name a few. Learners are placed at Curro schools and Curro-managed schools, and we work closely with the foundation to ensure that talented learners thrive, creating a brighter future for all. There are over 800 Ruta Sechaba learners at Curro today who are supported by compassionate and patriotic philanthropists really and donors to build bright futures. And I can only encourage you, if you feel inspired by the work of Ruta Sechaba, to contact them and to help more learners reach their potential. If we reflect on the class of 2024 and the matric results, we had 2,426 learners write the IAB exam with a 99% pass rate, and 2,217 learners completed the national senior certificate with a 95.5% pass rate. Curro's innovative strategies, together with the superb commitment of teachers and parents, underpin the impressive results that we saw from this particular group and which was achieved by diligent and ambitious learners. And for 2025, we should have nearly 5,500 learners sitting for their matric exams. I've listed some of the financial highlights for 2024 on this slide. And they include an increase in revenue of 8%, an increase in our recurring headline earnings of some 13%, which was echoed in a 13% increase of our annual dividend, and then an increase in our learners in 2024 of 1%. Cash generated from operations exceeded the investment in CapEx by ZAR 180 million to continue the trend of free cash generation since 2023. And these results, I believe, shows fortitude in a constrained environment. In evaluating the 2024 results, should take the key differences between the various earnings into account. And I think it's important. I mean, we are responsible custodians of shareholder capital, and we proactively review asset valuations to ensure that they align both with our ongoing performance and the ever-evolving risk landscape. We conduct annual impairment assessment reviews for the business plans of each of our schools every year as required by International Financial Reporting Standards. And in 2024, Curro recognized impairments of ZAR 365 million net of tax and that related to lower-yielding school assets. These impairments reflect our prudent approach to asset valuation, particularly for campuses affected by local economic challenges. These noncash items do not specifically impact our strong cash generation or our ability to invest in our schools and certainly doesn't hold us back to drive investor returns. The impairment charges are included in the calculation of earnings per share but are added back for the purposes of the calculation of headline earnings and recurring headline earnings. And that, of course, accounts for the key differences between those lines. I think it's really important to appreciate that this is a long cycle business. And we are confident that the quality of our education offering will be compelling and will result in growth. We built up significant growth momentum in Curro over the last 25 years. And the next 3 slides exhibit three key features of Curro's investment case. In the first place, Curro has strong expansion potential based on rollover from one growth and few the next. As an example, in 2024, we have 6,900 learners in Grade 8 and 5,500 learners in Grade 12. The rollover of learners across grades build Curro academic momentum, particularly in high school, with keen enrollment interest for this stage of schooling. Affordability is a challenge for families in the younger grades, and we are driving various operational strategies and adjusting our pricing architecture to recapture market share in the early schooling stages. Secondly, Curro has capacity to increase shareholder returns. We've invested nearly ZAR 14 billion to establish the business and its national footprint since 1998. And we created different school models that are relevant to different markets and at different price points. This exhibit shows the headroom capacity we have across our models to accommodate thousands more learners in Curro and in our current facilities. Overall, Curro has available capacity to accommodate another 30,000 learners. CapEx is therefore orientated to enhance and optimize the utilization of existing facilities. The next graph shows the gradual reduction of the CapEx investment in our schools over the last decade, and that's in orange, with an increase in the operating cash generated from those schools in blue. We've reached a stage in our business model where it's consistently generating more cash from operations than what is required for CapEx. And we are confident that this trend will continue, as you can also see in this reporting period. I will briefly recap on Curro's strategy, which is clear and unwavering. We generated strong growth momentum and we are focused on achieving the operating leverage that is available in our business model. This means that fundamentally, we're seeking to drive up operating profit and cash flows by growing revenue and improving our operating margin whilst containing CapEx. Revenue growth, of course, is a function of the number of learners enrolled and the fees charged per learner. There is sustained and significant support for the quality education offered by Curro. And generally, the average tuition fees per learner for 2025 increased by about 5.5%. Operating margin is a measure of business excellence. And accordingly, we are pleased with the ongoing improvement of our margin over the last few years despite the prevailing weak economic conditions. Slowing total fee revenue growth for the 2025 year injects some negative operating leverage, and I expect a slightly lower operating margin for this year. We will manage costs closely but we'll not curtail ambitious and high-quality education programs for our learners. And then we get to CapEx. Cash generated from operations should consistently exceed future CapEx requirements on a like-for-like basis, so of course, excluding material acquisitions. And excess cash should be channeled to shareholders. Curro continues to demonstrate strong financial discipline with our operating margin improving by nearly 4% since 2021, which really reflects our commitment to efficiency and to growth. Over the same 4 years, the return on capital employed for Curro improved by more than 3%. And for the second year in a row, we generated more cash than what we invested in CapEx, which showcase our business model's maturity and the potential for investors. The group's balance sheet is well structured to support our growth ambitions. Total net debt decreased slightly from 2023 to 2024, and we recently received our latest credit rating from a global credit rating company, who maintained the good long- and short-term national scale issuer ratings assigned to Curro with the revision of their outlook to positive from stable. The group's revolving and credit facilities and a portion of its term debt was refinanced successfully, and that certainly ensures that we have significant headroom to fund acquisitions. Cash generated from operating activities was similar to 2023, but free cash generated above CapEx increased by nearly 23%. Curro invested ZAR 669 million in its business in 2024 in various CapEx projects. And our objective is to increase capacity utilization at our existing facilities, and we will invest as much as ZAR 660 million in CapEx in 2025. Curro is in a healthy financial position and our business operations are resilient. We are confident that buying back shares is a smart capital allocation decision and that it will enhance shareholder value permanently. In terms of our general buyback authority, Curro has now acquired and canceled about 33 million shares for ZAR 337 million in aggregate over the last 3 years. And this year alone, Curro has now acquired nearly 11 million shares for ZAR 115 million. And then in conclusion, Curro has built significant momentum over the last decade to establish a brand of quality education across different platforms. Our models are efficient, they are scalable and certainly are capable of optimizing service and profitability. The slight decrease in learner enrollment in 2025 does throttle the pace at which we can achieve our return objectives over the medium term. But Curro is resilient and we remain on track to increase shareholder returns. Our learners recorded many remarkable achievements in 2024, and there's much, much more to come in 2025 and beyond. So thank you for taking an interest in Curro. As always, please contact me if you have any questions. And thank you for your support. All the best.