Curro posted solid profit growth in the year to the end of December, but primary school enrollments are under pressure and it will have to write down the value of some underperforming schools.
The group announced on Thursday that it would recognize an impairment charge of between R340 million and R380 million (after tax) in relation to these “low yield” schools.
Curro said 28 of the 182 schools had lower than expected growth rates over the past two years. “The company is cautiously reducing the book value of these schools relative to its weaker medium-term outlook.”
Rising cost of capital due to aggressive interest rate hikes over the past year also contributed to the impairment. The company's weighted average cost of capital rate, used in impairment calculations, increased from 14.5% in 2022 to 15.6% in 2023.
The number of learners in high schools is increasing as expected, but in elementary schools, the number of students enrolled in the youngest grades is decreasing. Curro blamed this on the “challenging impact of higher interest rates on constrained consumers, which particularly harmed young households.”
Curro currently has 73,159 registered learners, an increase of just 0.2% from 73,047 in February last year. Still, headline profits are expected to rise between 14.1% and 23.8% this year, the group said on Thursday.
The company's shares were down about 2% to R11.72 by late Thursday morning.
“We've been waiting for an impairment here for about 10 years. This feels too low. (This) may not be the last,” Keith McLachlan, chief investment officer at Integral Asset Management, said in a social media post. “I can't do it,” he said in a social media post.
Group results will be announced on March 5th. The company's stock price has increased 27% over the past year.