Curro marked down on trading statement


Curro marked down on trading statement

Published Date: 2019-02-06 | Source: Stephen Gunnion | Author: Stephen Gunnion

Curro marked down on trading statement

Forecast profit growth may have disappointed the market due to the lofty P/E multiple the private schools group trades on.

Curro's shares declined as much as 12% after a profit update failed to match expectations for the company's growth.

In a trading statement, the private schools group said earnings per share (EPS) for the year to end-December were likely to be between 15% and 20% higher than the previous year's 51c. Headline EPS would be up by 22% to 27% compared to the HEPS of 48.1c in 2017.

Curro has a historical price-earnings ratio of 48, which means that its share price is trading 48 times higher than its most recent earnings per share. Rival ADvTECH is on a P/E ratio of about 22. Curro has historically traded on a high P/E multiple due to its rapid expansion since listing on the JSE and expectations for future earnings growth.

The group unbundled and listed its tertiary education division Stadio on the JSE in October 2017. It said Stadio was treated in its results and the comparatives as a discontinued operation. It said its continued operations, being the Curro schools business, was expected to report a 20% to 25% rise in earnings for the year.

Apart from the possibility of a maiden dividend, analysts will also be watching for news of a recovery at its Meridian Schools unit, where learner numbers have declined marginally. Revenue and profitability at Meridian have also lagged growth at its Curro schools.

Its shares retraced some of their losses to close 7.5% down at R26.51.

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