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Unaudited Interim Results for the six months ended 31 August 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”)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2013
• Revenue up 8% to R434.6 million
• Profit after tax up 26.96%
• Headline earnings and earnings per share up 26.96% to 40.16 cents
• Net asset value per share up 16% to 298 cents
• Cash on hand of R155 million
• Pipeline in excess of R10 billion
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six Months Six Months Year ended
31 August 31 August 28 February
R'000 2013 2012 2013
Revenue 434 638 400 669 798 394
Cost of sales (372 642) (332 379) (650 436)
Gross profit 61 996 68 290 147 958
Net administrative expenses (28 296) (25 770) (58 584)
Operating profit 33 700 42 520 89 374
Net finance (cost)/income (2 595) (1 581) (1 540)
Share of profit of 27 638 12 434 29 406
Joint ventures(Net of tax)
Profit before taxation 58 743 53 373 117 240
Taxation (7 703) (13 176) (25 937)
Profit after taxation 51 040 40 197 91 303
Total comprehensive income 51 040 40 197 91 303
Profit Attributable to:
Equity holders of the company 51 040 40 197 91 303
Basic and diluted Earnings per
share – cents 40.16 31.63 71.84
Basic and diluted Headline earnings
per share – cents 40.16 31.63 71.84
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
31 August 28 February
R'000 2013 2013
ASSETS
Non-current assets
Property, plant and equipment 3 412 4 245
Deferred tax 14 733 13 908
Other non-current assets 183 978 135 101
202 123 153 254
Current assets
Inventories 284 823 264 580
Construction contracts and work in progress 250 055 141 483
Trade and other receivables 104 881 45 339
Other current assets 6 381 6 121
Cash and cash equivalents 154 853 198 343
800 993 655 866
Total assets 1 003 116 809 120
EQUITY AND LIABILITIES
Equity
Capital and reserves 378 397 327 358
Total equity 378 397 327 358
Non-current liabilities
Deferred income tax liability 33 885 26 863
Other non-current liabilities 74 215
33 959 27 078
Current liabilities
Current borrowings 442 141 299 890
Other current liabilities 148 619 154 794
590 760 454 684
Total liabilities 624 719 481 762
Total equity and liabilities 1 003 116 809 120
Net asset value per share – cents 297.72 257.56
EARNINGS RECONCILIATION
Unaudited Unaudited Audited
Six Months Six Months Year ended
31 August 31 August 28 February
R'000 2013 2012 2013
Determination of headline earnings
Attributable profit 51 040 40 196 91 303
Headline earnings 51 040 40 196 91 303
Determination of diluted earnings
Attributable profit 51 040 40 196 91 303
Diluted earnings 51 040 40 196 91 303
Number of ordinary shares (‘000) 127 100 127 100 127 100
Weighted average shares (‘000) 127 100 127 100 127 100
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Unaudited Audited
Six Months Six Months Twelve months
31 August 31 August 28 February
R'000 2013 2012 2013
Net cash from operating activities (167 500) 26 206 12 585
Net cash from investing activities (17 865) (20 678) 8 269
Net cash from financing activities 141 875 43 777 73 798
Net (decrease)/increase in cash and cash
Equivalents (43 490) 49 305 94 652
Cash and cash equivalents
at the beginning of the year 198 343 103 691 103 691
Cash and cash equivalents
at the end of the period 154 853 152 996 198 343
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained Total
Capital premium income equity
(Figures in Rands)
Balance at 1 March 2012
1 271 96 020 450 140 032 285 236 054 006
Profit for the period
- - 40 196 876 40 196 876
Total comprehensive income for
period ended 31 August 2012
- - 40 196 876 40 196 876
Balance at 31 August 2012
1 271 96 020 450 180 229 161 276 250 882
Balance at 1 March 2013
1 271 96 020 450 231 335 823 327 357 544
Profit for the period
- - 51 039 752 51 039 752
Total comprehensive income for
period end 31 August 2013
51 039 752 51 039 752
Balance at 31 August 2013
1 271 96 020 450 282 375 575 378 397 296
CONDENSED SEGMENT REPORT FOR THE GROUP
R'000 Construction
Land Land Professional
(Figures in Rands) Development Sales Services Total
Aug 2013
Revenue - External 428 768 1 963 3 907 434 638
Operating profit/(loss) 30 041 1 415 3 327 34 783
Finance cost (6 581) (7) - (6 588)
Adjusted profit/(loss)
before tax from reportable
segments 23 460 1 408 3 327 28 195
Aug 2012
Revenue - External 312 801 84 196 3 672 400 669
Operating profit/(loss) 39 267 27 3 441 42 735
Finance cost (4 184) - - (4 184)
Adjusted profit/(loss)
before tax from reportable
segments 35 083 27 3 441 38 551
August 2013
Assets
Goodwill 28 515 - 4 155 32 670
Inventories 21 022 263 800 - 284 822
Construction contracts 247 823 - - 247 823
Liabilities
Borrowings (442 141) - - (442 141)
February 2013
Assets
Goodwill 28 515 - 4 155 32 670
Inventories 23 199 242 404 - 265 603
Construction contracts 66 884 - - 66 884
Liabilities
Borrowings (191 000) (77 768) - (268 768)
A reconciliation of adjusted profit/(loss) before tax is provided as
follows:
R'000
31 Aug 2013 31 Aug 2012
Adjusted profit before tax for reportable segments 28 195 38 551
Share of profit of joint ventures – Net of tax 27 638 12 435
Total Segments 54 750 50 771
Finance income – net 3 993 2 602
Profit before tax 58 743 53 373
COMMENTARY
The Directors present the condensed consolidated interim financial results
for the six months ended 31 August 2013 (“the period”), which reflect an
improvement in a number of key financial indicators.
Results of the Group’s operations showed improvement in the period under
review, despite the tough trading environment in the development and
construction sectors. The continuing labour unrest in the Western Cape,
delays in electrical supply to the Jabulani project and increased activity
in the lower margin installation of services contributed to margins being
under pressure. Despite the prevailing negativity, the Group’s pipeline has
increased.
FINANCIAL RESULTS
Revenue at group level increased to R 435 million (Aug 2012: R401 million).
Profit after tax was R51 million (August 2012: R40,2 million). Headline
earnings per share increased by 26,96% to 40,16 cents (August 2012: 31,63
cents) with gross profit margins decreasing to 14,26%(August 2012 : 17,04%).
This was as a result of the increased activity in the installation of civil
and electrical infrastructure with a lower margin that precedes top
structure construction scheduled for the next 18 months, when the margin and
related cost from operations will increase again.
Revenue in Joint Ventures (JV’s) increased to R 347 million increasing
profits from JV’s to R 27,6 million (August 2012: R12,4 million). Calgro M3
fulfils the leading role in these JV’s as development partner and
contractor.
The Group’s cash position remains strong at R 155 million(February 2013 : R
198 million). Working capital continues to be closely monitored,
particularly the timeous receipt of debtors and the transfer of properties
to clients ensuring that money becomes due and payable.
Total net debt increased to R287,3 million (February 2013: R101,6 million),
as a result of the Group raising a new R 222 million 36 month unsecured
instrument at a variable interest rate of 4,5% above Jibar that expires on
30 June 2016. The capital was utilised to strengthen working capital on long
term projects, fast track the installation of infrastructure for future top
structure construction resulting in cash from operations being negative R
167 million and to settle secured debt at group level as well as secured
Fleurhof (JV) debt. This resulted in the Group’s balance sheet now being
completely unsecured and aligning the interest of Stakeholders to maximising
returns.
The statement of financial position remained steady with total assets of R1
billion (February 2013: R 809 million). No significant asset additions or
disposals occurred during the period under review. Management is of the
opinion that the Group is appropriately structured to support the
implementation of the pipeline and future growth.
Contract revenue from related parties increased to R 224 million (August
2012: R 183 million). Receivables from JV’s increased to R 125 million
(February 2013: R 57 million) due to the increase of the installation of
infrastructure that will be recouped through top structure construction and
the inability to register units on the Jabulani project due to power delays.
SHARE APPRECIATION RIGHTS SCHEME (SAR)
The Share Appreciation Rights Scheme (SAR) of 9,650,000 rights to directors
and senior management introduced 1 March 2012 (with a vesting period of 2,
3, 4 and 5 years if a hurdle growth rate linked to the Consumer Price Index
(CPI) is exceeded) resulted in an amount of R3 196 971 being recognised as
an expense in the Statement of Comprehensive Income for the period to 31
August 2013.
OPERATIONAL REVIEW
The pipeline was sustained in excess of R10 billion. The installation of
bulk infrastructure will commence on two new projects during the second half
of the 2014 financial year, converting more of the pipeline into
construction projects.
The Group experienced a renewed commitment from Government to increase
investment in infrastructure allowing the Group to deliver on infrastructure
for integrated developments. The six months under review saw an increase in
the installation of infrastructure, and although this put the gross margin
under severe pressure, it will enable the Group to increase its higher
margin construction of top structures during the next six months.
The Group benefitted from its exposure to Social Housing and units aimed at
the FLISP (Finance Linked Individual Subsidy Programme) market that is
currently gaining traction. With the FLISP pilot project successfully
completed more units are currently under construction on both the Fleurhof
and Jabulani projects.
As projected, construction capacity has reached a stage where the use of
external contractors is increasing to ensure that quality is maintained and
committed time lines with regards to delivery met. This is in line with the
Group’s commitment to partner with local and emerging contractors.
Infrastructure for the second phase of the Fleurhof project (Ext 5, 7 – 11)
was completed and construction of 809 units aimed at the bonded market,
Breaking New Ground (BNG) market and FLISP market, all contributed towards
revenue. The first of 400 units currently under construction for a Social
Housing Institute (SHI) reached completion and were handed over and
transferred at the end of the reporting period. The investment in
infrastructure (in excess of 2400 opportunities) in the third phase was fast
tracked and construction of top structures in this phase will contribute
during the next eighteen months. New contracts for the construction of 752
units aimed at the Social Housing and BNG markets were concluded. This was
complimented by the launch of units aimed at the bonded market.
Bulk and link infrastructure as well as internal infrastructure reached
completion on the Scottsdene project. The first pocket of 83 fully
subsidised housing units was completed and handed over to beneficiaries.
This was complimented by the handover of the first of 88 units aimed at the
bonded market. The balance of the 88 units aimed at the bonded market,
another pocket of 80 fully subsidised units as well as the first 154
Community Residential Units “CRU” units constructed for the City of Cape
Town, will be completed and handed over during the next six months.
Uncertainties with regards to the timing of the power supply to the Jabulani
CBD projects resulted in construction activity declining substantially,
putting project margins under pressure. The construction of the first two
land parcels are nearing completion, but with the installation of
infrastructure for the next land parcels delayed until certainty with
regards to power can be obtained, the project will not be a contributor
during the last six months of the 2014 financial year.
Construction of the last 36 units in the Jukskei View project will be
completed during the last six months of the financial year. A new project
aimed at this specific market segment was acquired and delays in the
installation of infrastructure for the Witpoortjie project was overcome and
will commence during the next reporting period.
The first two phases of the Brandwag project in Bloemfontein is nearing
completion with 282 units handed over and occupied. Although the third phase
of the project was awarded, construction has not commenced as the Group’s
risk has not been sufficiently mitigated as “financial closure” between
contracting parties could not be proven. Construction will not commence
until the Group’s payment risks have been mitigated.
The Mid-to-High income housing sector is still slow in showing a recovery.
With the installation of infrastructure for the first phase of the La Vie
Nouvelle project (retirement village) completed and sufficient sales having
been reached, the construction of top structures commenced during August.
All debt associated with this market segment has been settled and the Group
will continue to “landbank” these properties.
HEALTH & SAFETY
The Group maintained its exceptional safety record and was again free of
fatality and serious injuries in the workplace. The Group will strive to
maintain its target level of zero harm.
PROSPECTS
Trading conditions in the construction and development sector remain
challenging, but support from local government and strong end user sales in
the FLISP, GAP and Affordable markets are all contributing in making
integrated developments based on Private Public Partnerships successful.
Government’s undertaking to close the gap between fully subsidized housing
and the entry level affordable bonded market by providing Social Housing and
the newly revised FLISP units is continuing to create exciting new
opportunities and the Group is well positioned to make use of opportunities
presented.
Any reference to prospects included in this announcement has not been
reviewed by the Group’s external auditors.
CORPORATE GOVERNANCE
The directors and senior management of the Group endorse the Code of Governance
Principles and Report on Governance, together referred to as King III. Having
regard to the size of the Group, the Board is of the opinion that the Group
substantially complies with King III and with the Listings Requirements of the JSE
Limited. The Group performs regular reviews of its corporate governance policies
and practices and strives for continuous improvement in this regard.
APPRECIATION
Our management team has been instrumental in ensuring that growth has been
sustained. We thank them and look forward to continuing on this successful
path of creating value for our shareholders. We would also like to thank our
partners, clients and shareholders for maintaining confidence in us.
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, SAICA financial reporting guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by
Financial Reporting Standards Council, 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 2013. 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 11 October 2013.
2. Independent audit
These consolidated condensed interim financial statements have not been
audited or reviewed by the group’s external auditors.
3. Dividends
No dividends have been declared for the period. The Board is of the opinion
that the Group must continue to conserve cash to fund the present growth and
create shareholder value.
BP Malherbe (Chief executive officer) WJ Lategan (Financial director)
Johannesburg 14 October 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
Date: 14/10/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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