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CGR - Calgro M3 - Audited abridged results for the year ended 29 February 2012

Release Date: 10/05/2012 16:46
Code(s): CGR
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CGR - Calgro M3 - Audited abridged results for the year ended 29 February 2012 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") AUDITED ABRIDGED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2012 Highlights: Revenue up 82.69% to R515 million Headline earnings up 282% to R65.4 million Cash on hand of R103 million Property Fair value R1.385 billion vs. cost of R506 million Construction pipeline of R8 billion Transferred to the main board of the JSE Limited CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited Audited
Year Year ended ended 29 Feb 28 Feb R`000 2012 2011 Revenue 514 913 281 849 Cost of sales (435 398) (246 825) Gross profit 79 515 35 024 Other income 567 4 153 Other expenses (284) (9 309) Administrative expenses (36 579) (30 239) Operating profit/(loss) 43 219 (371) Share of profit/(loss)of Joint ventures (Net of tax) 34 326 16 343 Net finance income /(cost) 391 (661) Profit before taxation 77 936 15 311 Taxation (12 556) 1 644 Profit after taxation 65 380 16 955 Attributable to: Equity holders of the Company 65 380 16 955 Minority interest - - Earnings per share - cents 51.44 13.34 Headline earnings per share - cents 51.44 13.48 Fully diluted earnings per share - cents 51.44 13.34 Fully diluted headline earnings per share - cents 51.44 13.48 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited Audited Year Year ended ended
29 Feb 28 Feb R`000 2012 2011 ASSETS Non-current assets Property, plant and equipment 3 878 4 765 Deferred tax 12 889 11 624 Other non-current assets 99 333 65 767 116 100 82 156
Current assets Inventories 249 306 234 945 Construction contracts and work in progress 87 514 40 646 Trade and other receivables 15 827 14 602 Other current assets 23 446 6 119 Cash and cash equivalents 103 691 14 954 479 784 311 266 Total assets 595 884 393 422 EQUITY AND LIABILITIES Equity Capital and reserves 236 054 170 674 Total equity 236 054 170 674 Non-current liabilities Deferred tax 19 315 9 496 Other non-current liabilities 245 3 680 19 560 13 176
Current liabilities Borrowings 225 111 154 262 Other current liabilities 115 159 51 269 Bank overdraft - 4 041 340 270 209 572 Total liabilities 359 830 222 748 Total equity and liabilities 595 884 393 422 Net asset value per share - cents 185.7 134.4 EARNINGS RECONCILIATION Audited Audited Year Year Ended ended
29 Feb 28 Feb R`000 2012 2011 Determination of headline and diluted headline earnings Attributable profit 65 380 16 955 (Loss)Profit on disposal of property (3) 179 Headline and diluted headline earnings 65 377 17 134 Determination of earnings and diluted earnings Attributable profit 65 380 16 955 Earnings and diluted earnings 65 380 16 955 Number of ordinary shares (`000) 127 100 127 100 Weighted average shares (`000) 127 100 127 100 Fully diluted weighted average shares (`000) 127 100 127 100 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Audited Audited Year Year ended ended
29 Feb 28 Feb R`000 2012 2011 Net cash from operating activities 39 276 24 266 Net cash (utilised)/from investing activities (16 243) 9 137 Net cash from /(utilised) financing activities 69 745 (11 287) Net (decrease)/increase in cash and cash equivalents and bank overdraft 92 778 22 116 Cash and cash equivalents and bank overdraft at the beginning of the year 10 913 (11 203) Cash and cash equivalents and bank overdraft at the end of the year 103 691 10 913 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Capital Share Premium Share based payment reserve Balance at 1 March 2010 1 271 96 020 450 - Comprehensive income Profit for the year - - - Other comprehensive - - - income Total comprehensive - - - income
Balance at 01 March 2011 1 271 96 020 450 - Share options scheme - - 4 488 750 cancelled Bonus paid as - - (4 488 750) consideration for cancellation of share option scheme Share based payment - - - reserve Comprehensive income Profit for the year - - - Other comprehensive - - - income Total comprehensive - - - income Balance at 29 February 1 271 96 020 450 - 2012 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued) Retained Non- Total Equity
Income controlling interest Balance at 01 March 2010 57 696 796 - 153 718 517
Comprehensive income Profit for the year 16 955 441 - 16 955 441 Other comprehensive - - - income Total comprehensive 16 955 441 - 16 955 441 income Balance at 01 March 2011 74 652 237 - 170 673 958 Share options scheme - - 4 488 750 cancelled Bonus paid as - - (4 488 750) consideration for cancellation of share option scheme Share based payment - - - reserve Comprehensive income Profit for the year 65 380 048 - 65 380 048 Other comprehensive - - - income Total comprehensive 65 380 048 - 65 380 048 income Balance at 29 February 140 032 285 - 236 054 006 2012 CONDENSED SEGMENT REPORT FOR THE GROUP R`000 Land Professional Construction Development Services Total Feb 2012 Segment revenue 508 370 3 732 5 635 517 737 Inter-segment revenue - - (2 824) (2 824) Revenue from external Customers 508 370 3 732 2 811 514 913 Operating (loss)/profit 46 804 (3 945) 2 131 44 990 Finance cost (1 463) - (1 463) Assets Goodwill 28 515 - 4 155 32 670 Inventories 22 130 227 175 - 249 305 Construction contracts 85 459 - - 85 459 Liabilities Borrowings (147 221) (77 890) - (225 111) Feb 2011 Segment revenue 239 890 37 329 4 630 281 849 Inter-segment revenue - - - - Revenue from external Customers 239 890 37 329 4 630 281 849 Profit on sale of Investment - - - - Operating (loss)/profit 2 053 (1 766) 394 681 Finance cost (862) (1 165) - (2 027) Assets Goodwill 28 515 - 4 155 32 670 Inventories 20 213 214 733 - 234 946 Construction contracts 39 614 - 1 032 40 646 Liabilities Borrowings (62 369) (91 893) - (154 262) COMMENTARY INTRODUCTION The directors present the audited condensed consolidated financial results for the year ended 29 February 2012 ("the year"), which reflects a recovering integrated residential market segment. During the year under review Calgro M3 has again grown and further established itself as the leader in the integrated residential market segment. With new projects coming on line the risk profile of the Group reduced with the spread of its funding exposure over more projects and with different financial institutions, together with the extension of its operations to two other provinces (the Western Cape and Free State). The Group benefited from established relationships with funding partners and clients during the year, and leveraged these relationships to grow the business. Calgro M3 managed to increase its secured pipeline of projects to R8 billion from the reported pipeline of R5 billion a year ago, at the same time containing risk and managing resources. FINANCIAL RESULTS The Group has reported an increase in revenue of 82.69% from R282 million to R515 million and gross profit margin increase of 3.02% in comparison to the previous financial year. The Group`s joint venture projects earned total revenues of R414 million. As expected the Fleurhof, Jabulani CBD, Jabulani Hostel Redevelopment, Brandwag and Jukskei View projects all contributed towards revenue. The contribution by the Scottsdene project in the Western Cape, although small, was a welcome surprise as expectations were that a venture into a new province would take longer to contribute. With a 409.0% increase in profit before tax, the Group increased earnings by 285.6% from R16.9 million to R65.4 million. Overall operating margins increased due to our continuous focus on the containment of costs. Despite the 82.7% increase in revenue, operating overheads increased by a modest 21.0%. This increase can be attributed to existing capacity that was utilised to support growth. The Group foresees that overheads will further increase in the next two years to accommodate growth. Cash on hand is at a healthy level of R103 million (2011: R11 million) due to the conversion of profits into cash and additional working capital raised. This enabled the Group to provide bridging finance to projects to expedite their development. Cash generated by operations grew to R69.8 million from R53.3 million (31.0% increase). As the Group`s business cycle is longer than one year, all debt is reflected as current, to better match operating assets and operating liabilities. The external valuation of all properties in the Group (including joint ventures) equate to R1.385 billion when compared with a R506 million book value - this is primarily as a result of purchasing un-zoned land and completing the zoning process together with the installation of bulk infrastructure onto these projects. Management`s challenge will be to continue to grow the pipeline beyond the next six years while containing the increases in overheads in order for the full benefits of growth to be realised. The return on average shareholders` funds/equity has grown from 10.45% in 2011 to a healthy level of 32.14% for 2012. OPERATIONAL REVIEW After almost five years of listing on the AltX, the Group`s move to the main board signalled another milestone in its development and growth path. Renewed government commitments to infrastructural spend remains a positive influence on the delivery of integrated housing as the success of these projects is based on private public partnerships. Continued budget constraints within local governments, for the roll-out of subsidised units, has however, resulted in the subsidised component of these projects falling behind in comparison to the open market segment of the projects. These budget constraints and the limited availability of development finance for new projects require private sector players to inject more and more equity into projects, thereby raising the entry level for new players into this market segment, to an unnaturally high level. The Group`s venture into the Western Cape was not as trying as expected and operations came on line earlier than initially planned. This was made possible by a strong administration system and logistics capability created during the Group`s previous venture into the Free State Province. The installation of the infrastructure on the Scottsdene project is progressing well and the construction of units on the Elsies Rivier project neared completion towards the end of the year under review. As a result of building in-house construction capacity over the last few years and the success currently experienced with regard to construction quality, the Group will continue to make use of in-house capacity in the short-term in order to ensure on time delivery of completed units at the highest level of quality. The lower segment of the residential market again proved to be stronger than the higher segment of the market. The challenge for the Group this year will be to provide itself with more serviced stands at a pace dictated by market demand rather than the ability to raise development finance. As expected the mid-to-high income housing segment of the market did not recover to the levels of 2007 and as a result the projects acquired for this market segment have not contributed to revenue or gross margins during the year. The Group will therefore continue to "landbank" these properties while attempting to reduce Calgro M3`s exposure to the financial institutions on these properties. SAFETY, HEALTH & ENVIRONMENT ("SHE") The board is pleased to report on the Group`s exceptional SHE track record. Despite the dramatic increase in the number of employees on construction sites, the Group was again not only fatality-free, but also free of any serious injuries in the workplace. This reflects the Group`s on-going and absolute commitment to ensuring the Group sustains its target of zero harm. BOARD OF DIRECTORS The Group was able to retain the services of all executive directors but saw a change in non-executive directors with the appointment of Dr Mdu Gama as independent non-executive director, the resignation of Rob Wesselo as non- executive director and the appointment of Ralph Patmore as lead independent non-executive director. This was necessitated in order to comply with the requirements of the new Companies Act and King III. PROSPECTS The secured pipeline of integrated development projects will allow Calgro M3, in line with its evolving public private partnership policy, to assist government in its endeavour to eradicate the housing shortage. With the Group`s undertaking to venture into new provinces once operations in Gauteng have stabilised, the Company can now report that it is currently targeting the Free State and Western Cape provinces with fully operational offices in these provinces. The Group recognises the immense opportunity in other provinces and will again ensure controlled growth by venturing into new provinces only once operations in the provinces in which the Group currently does business are fully operational and self-sustaining. The above prospects statements have not been reviewed or reported on by the Company`s auditors. ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING A further announcement will be released on SENS in due course confirming the posting of the integrated report which will contain a notice of the annual general meeting. APPRECIATION The Group`s venture into the lower segment of the residential market is starting to bear fruit. The turnaround experienced in the last two years would not have been possible without the support and dedication of the senior executive team, senior management and loyal staff. The board would like to thank every Calgro M3 employee, whose continuous commitment and dedication, contributed towards the success of Calgro M3. The board would also like to thank all its other stakeholders, particularly its financial and development partners and government for their continued and loyal support. Notes 1. Basis of preparation These consolidated condensed financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) on Interim Financial Reporting (IAS34), the South African Companies Act and the Listings Requirements of the JSE Limited. The accounting policies are consistent with those used in the annual financial statements for the year ended 28 February 2011. The financial statements have been prepared by the financial director, Mr WJ Lategan CA(SA) and were approved by the board on 10 May 2012. 2. Independent audit These consolidated condensed financial statements have been audited by our auditors PricewaterhouseCoopers Inc., who have performed the audit in accordance with the International Standards on Auditing. A copy of the unqualified audit report and audited financial statements is available for inspection at the registered office of the Company. 3. Dividends No dividends have been declared for the financial year. BP Malherbe WJ Lategan (Chief executive officer) (Financial Director) Johannesburg 10 May 2012 Directors: PF Radebe (Chairperson) *, BP Malherbe (Chief executive officer), WJ Lategan (Financial Director), FJ Steyn, DN Steyn, JB Gibbon*#, H Ntene*, R Patmore*# RN Wesselo*,ME Gama*#) (*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) Sponsor: Grindrod Bank Limited Auditors: PricewaterhouseCoopers Inc. www.calgrom3.com Date: 10/05/2012 16:46:01 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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