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CGR - Calgro M3 - Unaudited interim results for the six months ended 31 August

Release Date: 22/10/2010 07:05
Code(s): CGR
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CGR - Calgro M3 - Unaudited interim results for the six months ended 31 August 2010 Calgro M3 Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 2005/027663/06) Share code: CGR ISIN: ZAE000109203 ("Calgro M3" or "the company" or "the Group") UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2010 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME R`000 Unaudited Audited Six months Year ended ended
31 August 28 February 2010 2009 2010 2009 Revenue 96,171 112,832 188,726 233,054 Cost of sales (76,267) (92,277) (161,058) (182,205) Gross Profit 19,904 20,555 27,667 50,849 Net Administrative expenses (13,879) (14,270) (26,704) (35,787) Impairment of inventory - (11,385) (13,065) (8,991) Gain on cancellation of put Option - - - 17,035 Impairment of goodwill - - - (14,714) Profit on sale of investment - 29,450 29,305 - Operating profit 6,025 24,350 17,203 8,392 Net Finance income/expense 299 226 (1,003) (506) Profit before taxation 6,323 24,576 16,200 7,886 Taxation (1,736) (2,974) (712) (1,864) Profit after taxation 4,587 21,602 15,488 6,022 Total comprehensive income 4,587 21,602 15,488 6,022 Profit attributable to: Owners of the company 4,587 21,602 15,488 6,022 Earnings per share - cents 3.61 17.00 12.19 4.74 Headline earnings per share - cents 3.61 (2.93) (7.64) 16.32 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION R`000 Unaudited Audited Six months Year
ended ended 31 August 28 February 2010 2009 2010 2009 ASSETS Non-current assets Property, plant and equipment 5,961 8,388 7,150 8,100 Loans to associates 28,549 19,888 15,424 - Other non-current assets 39,740 51,639 40,375 49,433 74,250 79,915 62,949 57,533 Current assets Inventories 246,188 254,414 266,393 260,115 Construction contracts 9,106 67,125 32,217 64,389 Trade and other receivables 10,860 6,824 14,428 18,368 Other current assets 19,115 13,361 15,502 13,836 Cash and cash equivalents 5,258 25,930 6,059 30,594 290,527 367,654 334,599 387,302
Assets of a disposal group classified as held for sale - - - 126,301 Total assets 364,777 447,569 397,548 571,136 EQUITY AND LIABILITIES Equity Capital and reserves 158,306 159,833 153,719 138,231 Total equity 158,306 159,833 153,719 138,231 Non-current liabilities Non-current borrowings 138,426 165,702 154,379 117,957 Other non-current liabilities 2,032 14,725 6,704 19,266 140,458 180,427 161,083 137,223 Current liabilities Current borrowings 8,740 10,036 9,650 69,350 Other current liabilities 41,834 82,364 55,834 104,094 Bank overdraft 15,439 14,909 17,262 15,842 66,013 107,309 82,746 189,286
Assets of a disposal group classified as held for sale - - - 106,396 Total equity and liabilities 364,777 447,569 397,548 571,136 Net asset value per share - cents 124.55 125.75 120.94 108.76 EARNINGS RECONCILIATION R`000 Unaudited Audited Six months Year ended ended
31 August 28 February 2010 2009 2010 2009 Determination of headline earnings Attributable profit 4,587 21,602 15,488 6,022 Impairment of goodwill - - - 14,714 Loss/(profit) on disposal of property, plant and equipment - - - - Profit on sale of investment - net of tax - (25,327) (25,202) - Headline earnings 4,587 (3,725) (9,714) 20,736 Determination of diluted earnings Attributable profit 4,587 21,602 15,488 6,022 Share option expense - - - (963) Diluted earnings 4,587 21,602 15,488 5,059 Number of ordinary shares 127,100 127,100 127,100 127,100 Weighted average shares 127,100 127,100 127,100 127,100 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS R`000 Unaudited Audited Six months Year ended ended
31 August 28 February 2010 2009 2010 2009 Net cash from operating activities 31,284 33,272 958 68,240 Net cash from investing activities (12,897) 7,614 (4,128) (30,666) Net cash from financing activities (17,365) (44,617) (22,785) (20,625) Net (decrease)/increase in cash and cash equivalents and bank overdraft 1,022 (3,731) (25,955) 16,949 Cash and cash equivalents and bank overdraft at the beginning of the period/year (11,203) 14,752 14,752 (2,197) Cash and cash equivalents and bank overdraft at the end of the period/year (10,181) 11,021 (11,203) 14,752 CONDENSED SEGMENT REPORT FOR THE GROUP Land Profes- Inter-
Construc- develop- sional group & R`000 tion ment services holding Total Aug 2010 Revenue 60,792 33,539 1,840 - 96,171 Operating (loss)/profit 5,653 (666) 1,577 (539) 6,025 Aug 2009 Revenue 104,363 8,276 519 (326) 112,832 Operating (loss)/profit 4,098 21,835 (820) (763) 24,350 Aug 2010 Total assets 29,149 237,452 - 98,176 364,777 Total liabilities (53,740) (93,426) - (59,304) (206,471) Feb 2010 Total assets 50,952 255,078 - 91,518 397,548 Total liabilities (5,364) (100,392) - (138,073) (243,830) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Rands) Attributable to the owners of the company Share Share Retained Total capital premium income equity Balance at 01 March 2009 1,271 96,020,450 42,208,687 138,230,408 Profit for the year - - 15,488,109 15,488,109 Total comprehensive income for the period ended 31 August 2009 - - 15,488,109 15,488,109 Balance at 28 February 2010 1,271 96,020,450 57,696,796 153,718,517 Profit for the period - - 4,587,329 4,587,329 Total comprehensive income for the period ended 31 August 2010 - - 4,587,329 4,587,329 Balance at 31 August 2010 1,271 96,020,450 62,284,125 158,305,846 Notes 1. Basis of preparation These consolidated condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) on Interim Financial Reporting (IAS34), the Listings Requirements of the JSE Limited and Schedule 4 of the South African Companies Act. The accounting policies are consistent with those applied in the audited annual financial statements for the year ended 28 February 2010. 2. Independent review These consolidated condensed interim financial statements have not been reviewed. 3. Dividends No dividend has been declared for the period. COMMENTS The directors present the condensed consolidated interim financial results for the six months ended 30 August 2010 ("the period"), that reflect anticipated significant improvement in a number of key financial indicators. The results reflect an upturn in sales across the board and predominantly in the affordable housing sector. This affirms the group`s growth strategy and flexible business model which enables Calgro M3 to selectively accelerate the profitable component/s of any integrated development. Calgro M3 achieved a number of major operational milestones during the period, including: *' completion of the civil and electrical infrastructure on Phase I of the Fleurhof project; * start of construction of housing structures in Phase 1 of the Fleurhof project; * successful bulk sales in the sectional title GAP component of both the Jabulani and Fleurhof projects; * adding of value to land acquired for the mid-to-high income Housing segment to be ready for project implementation on recovery of the market. FINANCIAL RESULTS The start of top structure construction in the Fleurhof project significantly boosted both the group`s profit and cash flow for the period. Although an upturn in revenue is also expected going forward, the benefits of executing two or more large projects simultaneously will only be partially realised during 2011, but will have a greater impact during FY2012. The lag is attributable to the lead time required to complete infrastructure prior to top structure construction commencing. The public sector strike during the period, which crippled the deeds office, has caused a delay in the number of property transfers expected to conclude during the period, to the six months ahead. The group reversed the headline loss of the previous comparable period, generating earnings of R4,5 million (31 August 2009: R21,6 million)and headline earnings of R 4,5 million (August 2009 : R(3,7 million)headline loss . A headline profit per share of 3.61 cents was achieved, compared to the headline loss of 2.93 cents incurred in the previous comparative period and headline loss of 7.64 cents for February 2010. Earnings per share of 3.61 cents for the period was down from 17 cents. These results are regarded by management as a satisfactory outcome in the current, still pressured economic climate. Calgro M3 continued to invest further in the Pennyville project. The group undertook construction in-house to rectify latent defects as a result of poor quality and non-performance under the sub-contractor agreement. This resulted in the termination of the sub-contractor agreement, as reported February 2010. Cash generated by operations increased substantially to R31,2 million from R1 million for the year ended 28 February 2010. The increase is attributable to cash now being utilised in the development and construction of current and new projects. The group`s balance sheet restructuring and debt reduction programme proved successful in terms of current financial goals and are at a level believed by management to be sustainable. Cash on hand at 31 August 2010 increased marginally to negative (R10.2) million from negative (R11.2) million at 28 February 2009. Although not a material improvement, management considers it to be significant after taking account of the additional cash injection into the construction of Fleurhof. Total goodwill amounted to R32.7 million, consistent with the previous comparative period. No major capital expenditure was incurred. OPERATIONAL REVIEW Of the more than 400 sale agreements currently concluded for full-title units at Fleurhof, construction of 199 began in July following completion of the civil and electrical infrastructure on Phase I. Early indications affirm that the calculated risk of installing services on the Fleurhof project during 2009/10 should start to realise benefits for the group in the second six months ahead. The group`s mid-to-high income housing operations started to show a slow increase in sales, which is expected to contribute positively during FY2012. The reason for the non-immediate translation of impact is that a certain level of pre-sales need be achieved prior to installation of civil infrastructure and commencement of construction. In this regard the group does not foresee balance sheet write-downs at this time. However, any cash lucrative offers will be fully assessed and considered. Strict discipline and intense focus by management saw the group successfully contain costs and continue to decrease overhead expenses while still retaining skilled project managers and construction-related staff in anticipation of future housing projects. An escalation in staff is expected when current projects reach full production and smaller projects are possibly brought on board. It is intended that any future increase in overheads will, where possible, be calculated on a variable cost per project basis. HEALTH & SAFETY Calgro M3 maintained its exceptional record of safety and was again not only fatality free, but also free of any serious injuries in the workplace. This reflects the group`s commitment to sustaining its target level of zero harm. PROSPECTS Notwithstanding continued cash flow and funding constraints at government levels during the period, the integrated housing market continues to hold promising prospects. The shortfall in delivery of housing units during 2009/10 to date, has only exacerbated the existing housing backlog in South Africa with pressure for delivery mounting in the run-up to the 2011 local elections. Further, with the likelihood of the Financial Services Charter being reinstated, financial institutions and developers alike will have renewed pressure to deliver on housing with a specific focus on the GAP market. Calgro M3 will continue to target development in the Gauteng province. Expansion into other regions in South Africa will be considered once Gauteng operations become settled in servicing the recovering market. With construction of units in the first phase of the Fleurhof project underway and the installation of infrastructure on the subsequent phases continuing, Calgro M3 is well poised to deliver on housing leading into 2011. Looking ahead, in addition to Fleurhof, progress on the Jabulani and Jukskei View projects is expected to have a positive effect in the six months ahead to year-end. The initial success of the Fleurhof and Jabulani projects (see `Operational Review`) bodes well for future growth in the affordable housing segment of the market. This is further supported by factors such as the decreasing impact of the National Credit Act which will improve opportunities to secure end-user finance on behalf of prospective home-buyers. Any forward looking statement included in this interim results announcement has not been reviewed or reported on by the company`s independent auditors. APPRECIATION We express our appreciation to our fellow directors, staff and stakeholders for their continued support during this tough but exciting period. We believe that we can now look ahead, and that the group is well positioned to go from strength to strength. BP Malherbe WJ Lategan (Chief executive officer) (Financial Director) Johannesburg 20 October 2010 Directors: PF Radebe (Chairperson) *, BP Malherbe (Chief executive officer), WJ Lategan (Financial Director), FJ Steyn, DN Steyn, JB Gibbon*#, H Ntene*, N Maninjwa*#, M Phetla-Lekhethe*#. (*Non-executive) (# Independent) Registered office: Cedarwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston 2196. (Private Bag X33, Craighall 2024) Transfer secretaries: Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107) Designated advisor: Grindrod Bank Limited Auditors: PricewaterhouseCoopers Inc. Company Secretary: Barnards Inc. www.calgrom3.com Date: 22/10/2010 07:05:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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