Paladin Capital gearing up for curro’s listing

Paladin Capital, the listed private equity investment company, is currently gearing itself up for a listing of its investment in private schools early in June. That is amidst mixed fortunes for the company during the financial year to February 2011.

Releasing the company’s financial results for the year-end to February 2011, acting CEO Piet Mouton said the company is nevertheless looking forward to the listing of Curro Holdings early in June this year. Curro currently has 12 private schools country-wide and plans to increase the number significantly over the next couple of years.

Paladin increased its interest in Curro in the period under review by 26% to 76%. This follows Paladin realising an after-tax profit of R208 million when it sold its 50% interest in CIC to Imperial for R364 million. A substantial portion of the proceeds has been invested in Curro, not only in the form of equity but also in debt.

“Curro is currently expanding aggressively and is planning a major rights issue shortly after the listing. Paladin intends to follow its rights. Curro will be the first schools company to list with its focus exclusively on private schools,” Mouton said.

Paladin’s total value of its unlisted investments, referred to as the sum of the parts (SOTP) value, increased by a hefty 46,3% to R2,99 per share during the period under review. Recurring headline earnings on the other hand, which mirrors the sum of Paladin’s effective interest in each of its underlying investments, regardless of its percentage shareholding, decreased by 37,3% to 12,1 cents per share.

Recurring headline earnings amounted to R69,8 million (2010: R95,5 million), with headline earning R199,9 million (2010: R217,3 million) or 34,5 cents per share (2010: 43,9 cents per share). The substantially higher headline as opposed to recurring profits primarily relates to marked-to-market profits at Paladin’s BEE investment company, Thembeka, which had seen an improvement in the share prices of its major investments over the last year.

Paladin Capital is an 81% held subsidiary of PSG Group and the group's preferred investment vehicle in industries other than agriculture, food and beverages. At year-end it had twelve investments across the economic spectrum. Given the company’s long term growth strategy, no dividend was declared.

Paladin’s mixed fortunes in the period under review follow adverse recessionary trading conditions in its construction and manufacturing related investments, comprising of Erbacon, Top Fix and GRW. This has however been addressed by new leadership and strategic direction at Ercacon, a cost cutting strategy at GRW and changes to management and cost cutting at Top Fix.

During the period under review Paladin increased its investments in Petmin, Erbacon and Spirit Capital. Subsequent to the year-end an interest of 45% was acquired in Energy Partners, a provider of energy saving solutions.

“We are optimistic about the prospects of the Paladin portfolio, which contains a good mix of stable earners and businesses that have been restructured to extract more value from the current environment, and then those like Curro with the potential to develop into something really significant,” Mouton said.