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CALGRO M3 HOLDINGS LIMITED - Audited abridged results for the year ended 28 February 2013

Release Date: 07/05/2013 14:00
Code(s): CGR     PDF:  
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Audited abridged results for the year ended 28 February 2013

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")

HIGHLIGHTS

Revenue up 55.05% to R798 million
Operating profit up 106.79% to R89 million
Headline earnings up 39.66% to R91,3 million
Construction pipeline in excess of R10 billion


AUDITED ABRIDGED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2013

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                   Audited      Audited
                                                      Year         Year
                                                     ended        ended
                                                    28 Feb       29 Feb
R’000                                                 2013         2012
Revenue                                            798 394      514 913
Cost of sales                                     (650 436)    (435 398
Gross profit                                       147 958       79 515
Other income                                         1 265          567
Other expenses                                      (5 146)        (284)
Administrative expenses                            (54 703)     (36 579)
Operating profit                                    89 374       43 219
Share of profit of
Joint ventures (Net of tax)                         29 406       34 326
Net finance income                                  (1 540)         391
Profit before taxation                             117 240       77 936
Taxation                                           (25 937)     (12 556)
Profit after taxation                               91 303       65 380
Attributable to:
Equity holders of the Company                       91 303       65 380
Minority interest                                        -            -
Earnings per share - cents                           71.84        51.44
Headline earnings per share - cents                  71.84        51.44
Fully diluted earnings per share - cents             71.84        51.44
Fully diluted headline earnings per share - cents    71.84        51.44


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                   Audited      Audited
                                                      Year         Year
                                                     ended        ended
                                                    28 Feb       29 Feb
R’000                                                 2013         2012
ASSETS
Non-current assets
Property, plant and equipment                        4 245        3 878
Deferred tax                                        13 908       12 889
Other non-current assets                           135 101       99 333
                                                   153 254      116 100
Current assets
Inventories                                        264 580      249 306
Construction contracts and work in progress        139 251       87 514
Trade and other receivables                         45 339       15 827
Other current assets                                 8 353       23 446
Cash and cash equivalents                          198 343      103 691
                                                   655 866      479 784
Total assets                                       809 120      595 884
EQUITY AND LIABILITIES
Equity
Capital and reserves                               327 358      236 054
Total equity                                       327 358      236 054
Non-current liabilities
Deferred tax                                        26 863       19 315
Other non-current liabilities                          216          245
                                                    27 079       19 560
Current liabilities
Borrowings                                         299 890      225 111
Other current liabilities                          154 793      115 159
                                                   454 683      340 270
Total liabilities                                  481 762      359 830
Total equity and liabilities                       809 120      595 884

Net asset value per share - cents                    257.6        185.7


EARNINGS RECONCILIATION
                                                   Audited      Audited
                                                      Year         Year
                                                     ended        ended
                                                    28 Feb       29 Feb
R’000                                                 2013         2012
Determination of headline and diluted headline earnings
Attributable profit                                 91 303       65 380
(Loss)Profit on disposal of property                     -           (3)
Headline and diluted headline earnings              91 303       65 377
Determination of earnings and diluted earnings
Attributable profit                                 91 303       65 380
Earnings and diluted earnings                       91 303       65 380
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
                                                    28 Feb       29 Feb
R’000                                                 2013         2012
Net cash from operating activities                  12 585       39 276
Net cash from/(utilised in) investing activities     8 269      (16 243)
Net cash from financing activities                  73 798       69 745
Net increase in cash and cash 
equivalents                                         94 652       92 778
Cash and cash equivalents the beginning
of the year                                        103 691       10 913
Cash and cash equivalents the end
of the year                                        198 343      103 691

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                          Share Capital   Share Premium     Share based
                                                                payment
                                                                reserve
Balance at 1 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 01 March 2012          1 271      96 020 450               -

Comprehensive income
Profit for the year                   -               -               -
Other comprehensive                   -               -               -
income
Total comprehensive                   -               -               -
income

Balance at 28 February            1 271      96 020 450               -
2013


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)
                              Retained           Non-      Total Equity
                                Income    controlling
                                             interest
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 01 March 2012   140 032 285              -       236 054 006
Comprehensive income
Profit for the year         91 303 538              -        91 303 538
Other comprehensive                  -              -                 -
income
Total comprehensive         91 303 538              -        91 303 538
income

Balance at 28 February     231 335 823              -       327 357 544
2013


CONDENSED SEGMENT REPORT FOR THE GROUP
R’000                                             Land    Professional
                        Construction       Development        Services      Total
Feb 2013
Segment revenue              765 925             2 698          32 182    800 805
Inter-segment revenue              -                 -          (2 411)    (2 411)
Revenue from external
Customers                    765 925             2 698          29 771    798 394
Operating profit/(loss)       67 543            (4 909)         28 875     91 509
Finance cost                  (9 970)                -               -     (9 970)
Assets
Goodwill                      28 515                 -           4 155     32 670
Inventories                   20 206           244 374               -    264 580
Construction contracts       139 251                 -               -    139 251
Liabilities
Borrowings                  (221 000)          (78 890)              -   (299 890)
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)

RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX
                                                       Audited             Audited
                                                          Year                Year
                                                         ended               ended
                                                        28 Feb              29 Feb
R’000                                                     2013                2012
Adjusted profit before tax for reportable segments      81 538              43 527
Group overhead cost                                     (2 135)             (1 771)
Share of profit of joint ventures – Net of tax          29 406              34 326
Total segments                                         108 809              76 082
Finance income – net                                     8 431               1 854
Profit before tax                                      117 240              77 936

RELATED PARTY TRANSACTIONS
                                                       Audited             Audited
                                                          Year                Year
                                                         ended               ended
                                                        28 Feb              29 Feb
    R’000                                                 2013                2012
    Compensation paid to key employees and personnel    20 925              24 542
    Finance income from related parties                  6 409               1 801
    Contract revenue received from joint ventures      391 117             287 672
    Services fees received from joint ventures          29 103              19 139

COMMENTARY
INTRODUCTION

The Group is well under way to converting its pipeline of projects into
construction projects, as demonstrated in this set of results. The
Company is committed during this expansionary phase, to ensure
controlled growth and the controlled increase in overheads. The focus
will remain on stabilizing operations and building capacity to ensure
effective implementation of pipeline projects before venturing into new
provinces. The Group will continue to closely monitor and maintain a
healthy cash balance while balancing exposure between financial
institutions.

The Group will not deviate from its stated strategy to become the
residential developer of choice for government, financial institutions
and funding partners, equity and debt alike, and will concentrate its
efforts on the sustainable delivery of quality integrated developments
while re-entering the mid- to high-segment of the market with the launch
of the La Vie Nouvelle retirement project in Gauteng.

With the Fleurhof integrated development now functioning as a community
rather than merely a construction project, the principle of integrated
developments has been firmly established and demonstrating benefits to
role-players in the market segment. We are proud of the results thus far
and of the accolades Fleurhof has been receiving.

The Group benefited from established relationships with funding partners
and clients and used these relationships to grow the business. We are
pleased to report that Calgro M3 has managed to grow its secured
pipeline of projects to in excess of R10 billion from the reported
pipeline of R8 billion a year ago. Risk was contained throughout and
resources grown and effectively managed. Continued focus on delivery of
construction projects in Gauteng, Free State, and the Western Cape was
complemented by the award of a project in the North West province in
line with the Group’s strategy of increasing its exposure in the
province.

Cash generated from operations and from structured debt-raising, enabled
the Group to provide bridging finance to fast track the implementation
of projects.

Through the policy of utilising local labour and skills training on
site, the Group was able to create in excess of 5 000 direct new job
opportunities in a sustainable way as the average duration of these
projects exceed a three year construction period. The effect of job
creation is multiplied when one takes into account the number of
indirect jobs which were created as a knock-on effect in the
manufacturing of building materials.


The Group’s most significant achievements during the year comprised:

  -   the awarding of the Boitekong project in the North West Province in
      line with a strategic thrust to obtain a footprint in the province
      thereby benefiting from the new Mining Charter becoming effective
      2014;
  -   the awarding of the Vista View project in the Free State,
      increasing the group’s footprint in the province;
  -   creating in excess of 5 000 job opportunities in line with
      government’s drive for job creation;
  -   reporting zero fatalities and no serious injuries in the work
      place;
  -   construction of the first top structures commenced in the Western
      Cape;
  -   the handover of the first fully subsidised units in the Fleurhof
      project;
  -   completion of the first phase of the Jabulani Hostel re-development
      project;
  -   receiving environmental approval to proceed with the South Hills
      project;
  -   transferring the first sectional title units and handing over to
      end-users and body corporates in the Jabulani project;
  -   installing infrastructure on the La Vie Nouvelle retirement village
      project to enable the group to launch in the new financial year;
      and
  -   nearing completion of the Jukskei View project by selling out all
      units.


FINANCIAL RESULTS
When compared with the previous financial year, the Group’s revenue
increased by 55.05% from R514 million to R798 million while the gross
profit margin increased from 15.44% to 18.53%.

Operating profit increased 106.79% due to the increase in Group revenue
and effective cost containment. Profit before tax increased by 50.43%
due to challenges experienced on JV projects resulting in lower profit
contribution from them (these issues were resolved by year end). A
higher tax rate resulted in a 39.65% increase in profit after tax.

Cash on hand is at a healthy R198 million (2012: R103 million). Cash
generated from operations decreased from R69.8 million in 2012 to R49.4
million for the period under review. This was as a result of longer term
construction time frames, on bigger than previous bulk deals. Another
contributing factor was the upfront investments in projects (included in
construction contracts) where professional fees and services on projects
were installed prior to top structure construction (Scottsdene – R 29
million and La Vie Novelle - R 13 million). Taking the stressed economic
environment into account management is focused on the continual
proactive monitoring of capital and more specifically, cash liquidity.

As at year-end the Group held in excess of 40% of its total liabilities
in cash. Listed bonds to the value R 40 million were repaid and 
R 126 million was raised.

An inventory write-down of R 5 146 385 to net releasable value was
charged to the statement of comprehensive income during the financial
year on the Mabopane project.


OPERATIONAL REVIEW

In line with the National Development plan, government’s commitment to
infra-structural spend remains a positive influence on the delivery of
integrated housing as the success of these projects is based on
private/public partnerships. With the public and private sector both
actively involved in the provision of housing, the Group was able to
partner both sector role-players, and refine the integrated model by
optimising the product offering to the benefit of the communities
residing in the projects.

The year was however not without its challenges. Labour unrest in the
Western Cape Province made it difficult to operate at full capacity
during the top structure construction phase of the project, thereby
affecting both revenue and profitability. Although labour action and
transport strikes now form part of the South African trading
environment, the violent nature of intimidation on these strikes caused
the project to be delayed beyond expectations.

On the back of construction capacity, build-up during the last few
years, and the success experience with regards to construction quality,
the Group continued to make use of in-house capacity in order to ensure
quality is maintained at the highest level, and will look at making use
of external contractors only to complement capacity if and when needed.

The Group further commenced the installation of services on the La Vie
Nouvelle project, aimed at the mid to high segment of the market, to be
launched in the new financial year. The group will continue to
“landbank” the balance of properties while attempting to reduce its
exposure to financial institutions, and monitor the recovery of the
market.

Statements contained in this abridged results announcement regarding the
prospects of the Group have not been reviewed or reported on by the
Company’s auditors.

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 not only fatality-free again, but also
free of any serious injuries in the workplace again. This reflects the
Group’s on-going and absolute commitment to ensuring that the Group
maintains its zero harm target achievements.

BOARD OF DIRECTORS
Rob Wesselo resigned as non-executive director during May 2012 due to a
conflict of interest. The Group was able to retain the services of all
executive and other non-executive directors. In order to comply with the
requirements of the new Companies Act and King III, the role of
financial director and company secretary was split post year-end. Wayne
Williams was appointed as company secretary effective 1 April 2013.


ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of shareholders
will be held on 25 June 2013 at 10h00 at the main boardroom, Calgro M3,
Ballywoods Office Park, Cedarwood, 33 Ballyclare Drive, Bryanston, to
transact business as stated in the notice of the Annual General Meeting
posted to shareholders as detailed above.

The annual report containing notice of the annual general meeting will
be posted to shareholders on or about 30 May 2013.

APPRECIATION
The positive turnaround experienced in the last two years would not have
been possible without the support and dedication of our loyal staff,
senior management and executive team. We would like to thank every
Calgro M3 employee, whose continuous commitment and enthusiasm has
contributed towards the success of Calgro M3.

The board would also like to thank all 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, SAICA financial reporting guides as issued
by the Accounting Practices Committee and Financial Pronouncements as
issued by Financial Reporting Standards Council, IAS 34, 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 29 February 2012. The financial
statements have been prepared by Mr WA Joubert (CA)SA under supervision
of Mr WJ Lategan CA(SA), and were approved by the board on 7 May 2013.

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
Cash will be retained to fund growth in the absence of readily available
development finance. The board of directors has therefore resolved not
to declare a dividend for this reporting period.

BP Malherbe                                         WJ Lategan

(Chief executive officer)                          (Financial Director)



Johannesburg                                        7 May 2013



Directors:

PF Radebe (Chairperson) *, BP Malherbe (Chief executive officer), WJ Lategan
(Financial Director), FJ Steyn, DN Steyn, JB Gibbon*#, H Ntene*, R Patmore*#,
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

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