VENTURES: PSG Goes Back To School
Recent Western Cape Business News
STELLENBOSCH-based investment group PSG have always been a clever lot when it comes to deal making. So why then is the company going back to school?
Last year Paladin Capital – an 80% owned subsidiary which has been flagged as PSG’s preferred investment vehicle – made its first foray into private education by buying a small strategic stake in a fledgling private school enterprise called Curro Holdings.
Recently Paladin bumped up its stake in Curro to 76% - a deal that values the private schools enterprise at R200 million. Paladin’s investment in Curro is north of R100 million – making the enterprise one of the biggest investments in its portfolio.
Private education can be a profitable venture – especially if undertaken on grand scale as witnessed at the highly profitable AdvTech Group (one of the star performers on the JSE in the last decade). But private school ventures – especially those that aim to expand to different centres – need to be able to reach into deep pockets.
Curro’s current schools are based at Durbanville and Langebaan with another at Hazeldean (Pretoria East) and Roodeplaat Dam (Pretoria North).
Initially a private school conglomerate hardly seemed the intention. Curro was founded in 1998 by the current CEO Chris van der Merwe. Van der Merwe reckoned opportunities in public education were limited and – joined by his teacher wife - took 20 students each with the aim of providing them intensive attention on the foundation and intermediary phases in a private capacity.
Apparently the local community’s interest was so overwhelming that van der Merwe had to move into a church building before opting to build Curro’s Durbanville campus in 2000 with a 100% loan from Absa. It appears initial successes have prompted some ambitious expansion plans. Paladin has indicated that Curro aims to expand aggressively in the foreseeable future by establishing more than 10 schools over the next three years across the country. Hermanus has already been earmarked for a new school site with Paladin already helping Curro fund developments by securing a R73 million ten-year, fixed rate loan facility from International Finance Corporation.
The early successes of Curro are evident in its financial results. In the nine months to end December 2007 revenue of R18.6 million was generated, which grew to R34 million in the year to end December 2008.
Learner numbers over that period increased from 1 107 to 1 638. At last count Curro had over 3 000 pupils, and had managed to turn a profit of R1.9 million.
It seems the ‘pitch’ for Curro is around affordable private education – offering fees that are up to 40% lower than its competitors.
PSG and Paladin chairman Jannie Mouton believes the demand for Curro’s services will continue to increase.
He argues that demand for high quality and affordable private education will be driven by a growing middle class in SA, the fact that very few schools are being built in middle and upper income areas and because waiting lists at private schools are long.
Mouton points out that only about 3% of pupils attend private schools compared to 22% of the population who receive private healthcare.
“More and more South Africans are subscribing to the adage that the best investment is a good education.”
“Education is one of the most basic needs of society. It falls just below food and shelter in terms of importance and we are of the opinion that an educated community will improve the long-term sustainable wellbeing of society.”
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