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Audited results for the year ended 28 February 2015
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 RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2015
HIGHLIGHTS
Profit after tax up 37.9% to R145.7 million
Headline earnings per share up 31.9% to 109.69 cents
Pipeline has been maintained in excess of R19 billion
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Year ended Audited year ended
R’000 28 Feb 2015 28 Feb 2014
Revenue 932 205 784 943
Cost of sales (757 334) (671 954)
Gross profit 174 871 112 989
Other income 8 521 1 793
Other expenses (691) (3 553)
Administrative expenses (98 900) (58 378)
Operating profit 83 801 52 851
Share of profit of and associates – Net of tax 86 827 66 161
Net finance (cost)/income (2 479) (3 797)
Profit before taxation 168 149 115 215
Taxation (22 520) (9 519)
Profit after taxation 145 629 105 695
Profit after taxation and other comprehensive income
attributable to:
- Owners of the parent 145 716 105 695
- Non-controlling interests (87) -
145 629 105 695
Attributable to:
Equity holders of the Company 145 716 105 695
Earnings per share - cents 114.65 83.16
Headline earnings per share - cents 109.69 83.16
Fully diluted earnings per share - cents 114.65 83.16
Fully diluted headline earnings per share - cents 109.69 83.16
EARNINGS RECONCILIATION
Audited Audited
Year ended Year ended
R’000 28 Feb 2015 28 Feb 2014
Determination of headline and diluted headline earnings
Attributable profit 145 716 105 695
(Profit)/Loss on disposal of property,
plant & equipment (83) -
Gain on deemed disposal of interest in
joint-venture (6 222) -
Headline and diluted headline earnings 139 411 105 695
Determination of earnings and diluted earnings
Attributable profit 145 716 105 695
Earnings and diluted earnings 145 716 105 695
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
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
Year ended Year ended
R’000 28 Feb 2015 28 Feb 2014
ASSETS
Non-current assets
Property, plant and equipment 1 754 2 612
Deferred income tax asset 13 825 18 639
Intangible Assets 40 971 32 986
Investment in joint ventures and associates 229 568 142 740
Investment Property 5 743 5 743
291 861 202 720
Current assets
Inventories 498 089 385 826
Construction contracts and work in progress 212 364 179 487
Trade and other receivables 171 100 220 045
Other current assets 26 486 46 566
Cash and cash equivalents 130 565 62 893
1 038 604 894 817
Total assets 1 330 465 1 097 537
EQUITY AND LIABILITIES
Equity
Stated capital 96 022 96 022
Retained income 482 747 337 031
578 769 433 053
Non-controlling interests (87) -
Total equity 578 682 433 053
Non-current liabilities
Deferred income tax liability 37 952 37 128
37 952 37 128
Current liabilities
Borrowings 492 132 470 929
Other current liabilities 221 699 156 427
713 831 627 356
Total liabilities 751 783 664 484
Total equity and liabilities 1 330 465 1 097 537
Net asset value per share - cents 455.30 340.72
Net tangible asset value per share - cents 423.06 314.77
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
Year ended Year ended
R’000 28 Feb 2015 28 Feb 2014
Net cash from operations 79 177 (291 953)
Net cash from/(utilised in) investing activities (25 576) (16 091)
Net cash from financing activities 14 072 172 593
Net increase in cash and cash equivalents 67 673 (135 450)
Cash and cash equivalents the beginning
of the year 62 893 198 343
Cash and cash equivalents the end
of the year 130 565 62 893
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Retained Total Non- Total
R’000 Capital Income Controlling Equity
Interests
Balance at 1 March 2013 96 022 231 336 327 358 - 327 358
Profit for the year - 105 695 105 695 - 105 695
Total comprehensive income - 105 695 105 695 - 105 695
Balance at 01 March 2014 96 022 337 031 433 053 - 433 053
Profit for the year - 145 716 145 716 (87) 145 629
Total comprehensive income - 145 716 145 716 (87) 145 629
Balance at 28 February 2015 96 022 482 747 578 769 (87) 578 682
CONDENSED SEGMENT REPORT FOR THE GROUP
Construction and Sale of Land Professional
R’000 Infrastructure Development and Development Services Total
February 2015
Segment revenue 732 248 180 834 19 123 932 205
Inter-segment revenue - - - -
Revenue from external
Customers 732 248 180 834 19 123 932 205
Operating profit 41 689 27 315 17 031 86 035
Finance cost (365) (11 863) - (12 229)
Adjusted profit before tax 41 324 15 452 17 031 73 806
February 2014
Segment revenue 762 951 7 440 14 552 784 943
Inter-segment revenue - - - -
Revenue from external
Customers 762 951 7 440 14 552 784 943
Operating profit/(loss) 43 347 (1 469) 13 271 55 149
Finance costs (13 470) 20 - (13 450)
Adjusted profit before tax 29 877 (1 449) 13 271 41 699
February 2015
Assets 234 761 498 089 18 308 751 158
Goodwill 36 550 - 4 155 40 705
Inventories - 498 089 - 498 089
Work in progress - - 14 153 14 153
Construction contracts 198 211 - - 198 211
Liabilities
Borrowings (137 730) (354 402) - (492 132)
February 2014
Assets 229 613 364 215 8 557 602 385
Goodwill 28 515 - 4 155 32 670
Inventories 21 611 364 215 - 385 826
Work in progress - - 4 402 4 402
Construction contracts 179 487 - - 179 487
Liabilities
Borrowings (131 796) (339 133) - (470 929)
A RECONCILIATION OF ADJUSTED PROFIT/(LOSS) BEFORE TAX IS PROVIDED AS FOLLOWS:
Audited Audited
Year Year
ended ended
28 Feb 28 Feb
R’000 2015 2014
Adjusted profit before tax for reportable segments 73 806 41 699
Group overhead cost (2 234) (2 298)
Share of profit of joint ventures – Net of tax 86 827 66 161
Total segments 158 399 105 563
Finance income – net 9 774 9 652
Profit before tax 168 149 115 215
REPORTABLE SEGMENTS' ASSETS ARE RECONCILED TO TOTAL ASSETS AS FOLLOWS:
Audited Audited
Year Year
ended ended
28 Feb 28 Feb
R’000 2015 2014
Segment assets for reportable segments 751 159 602 384
Unallocated:
Deferred tax 13 825 18 639
Investment property 5 743 5 743
Property, plant and equipment 1 754 2 612
Intangible assets excluding goodwill 266 316
Investments in joint ventures 229 568 142 740
Loans to joint ventures 16 793 35 818
Loans and receivables 5 757 5 757
Current tax receivable 3 936 589
Trade and other receivables 171 100 220 045
Cash and cash equivalents 130 565 62 893
Total assets per the consolidated statement of
financial position 1 330 465 1 097 537
REPORTABLE SEGMENTS' LIABILITIES ARE RECONCILED TO TOTAL LIABILITIES
AS FOLLOWS:
Audited Audited
Year Year
ended ended
28 Feb 28 Feb
R’000 2015 2014
Segment liabilities for reportable segments 492 132 470 929
Unallocated:
Deferred tax 37 952 37 128
Current tax 62 154
Finance lease obligations - 215
Trade and other payables 221 638 156 057
Total liabilities per the consolidated statement
of financial position 751 783 664 484
RELATED PARTY TRANSACTIONS
Audited Audited
Year Year
ended ended
28 Feb 28 Feb
R’000 2015 2014
Compensation paid to key employees and personnel 33 922 23 923
Finance income from related parties 6 506 7 833
Contract revenue received from joint ventures 501 106 473 299
Services fees received from joint ventures 9 349 13 810
COMMENTARY
INTRODUCTION
Calgro M3 was able to sustain its impressive growth curve for the fifth consecutive year, yet again
delivering a solid set of financial results.
2015 was highlighted by a strengthened pipeline, investment in new ventures that will result in
diversification, and increased focus on sustainable construction practices. The business model,
which is defined by its turnkey approach to property development and the diversification of risk
through the development of products that target a broad spectrum of the residential market, has
ensured the delivery of a good set of results for the 2015 financial year. Its strong pipeline of secured
projects has positioned the Group as a strategic partner to Government.
The expected decrease in the Group’s exposure to infrastructure development after the 2014
elections did not materialise and an increase in urgency from Government towards the provision of
low to medium cost housing related infrastructure is expected to continue to the 2016 local
elections. Momentum was maintained in the installation of infrastructure while, simultaneously, the
Group benefited from an increased focus on the construction of top structures. The introduction of
external contractors to grow the Group’s construction capacity to deliver on its projects has proven
successful. With nine projects currently running consecutively and with the potential of a further
two projects commencing during the 2015/2016 financial year, the Group’s risk profile has been
significantly diversified. With an ever increasing barrier to enter into the integrated market segment,
the Group has benefited from the introduction, by the National Department of Human Settlements
(in partnership with provinces), of new initiatives such as the Mega and Catalytic Projects
Programmes.
The Group is especially excited to report on a new business venture it started in 2015 that focuses
on the development of private memorial parks. The memorial parks project, founded on the
principle of utilizing Calgro M3 owned land parcels not suitable for residential development, is
currently in the pilot phase of development and will de-risk the Group in terms of its dependence on
power utilities for the provision of power. The project will also assist Government in the delivery of
and the meeting of the growing demand for safer and better maintained alternatives to the
cemeteries currently available in the market.
The Group’s most significant achievements/events during the year:
• The Group has been fatality-free on all construction sites again;
• Fleurhof was awarded three 2014 Govan Mbeki Awards, being for Best FLISP Project of the
Year, the Best Informal Settlement Upgrade of the Year and the Best Integrated Project of the Year;
• Calgro M3 received a merit award in “The benchmark for integrated reporting 2014”, from
the Chartered Secretaries South Africa and the JSE Ltd for the second year running;
• The acquisition of a 50% interest in the R4.9 billion Tanganani Ext 14 project in Diepsloot
from Esor;
• The first units handed over to home owners in the La Vie Nouvelle retirement and lifestyle
project;
• Breaking ground on three projects namely South Hills in Johannesburg, the Jabulani CBD
hostel redevelopment project in Soweto and the Belhar Project in Cape Town;
• Resolving electrical supply issues and thereby not repeating construction losses on the
Jabulani project; and
• Improving the Groups B-BBEE rating to a level 3 contributor.
FINANCIAL AND OPERATIONAL PERFORMANCE
As a result of continued growth, the Group’s statement of financial position strengthened for the
fifth consecutive year with net gearing ratios stabilizing, cash balances increasing and a consistent
current ratio.
Operating profit and earnings increased compared to the previous period. Solid operating
performances by the Fleurhof, Sagewood and Scottsdene projects boosted the Group’s combined
revenue to R1,7 billion. Towards the end of the financial year, the Belhar, South Hills and Jabulani
Hostels projects also started contributing towards revenue and will contribute towards growth for
the 2016 financial year.
The gross profit margin increased as a result of the Group’s exposure on construction of top
structures leading up to the 2016 local elections. Other income grew as a result of the “deemed gain
on disposal of interest in joint ventures” of R6.22 million, when the Group acquired the remaining
24% of the Summerset project, which is now wholly-owned by the Group.
Overheads are inflated by an unexpected share appreciation rights scheme (SAR) expense in the
amount of R45,2 million, which was brought about by a steep upward curve in the share price in
December 2014.
Although the land portfolio is carried in the financial statements at a value of R550 million, the total
external valuations of the Group’s land portfolio, excluding joint venture partner interests, is
maintained in excess of R1.4 billion.
The fast-tracking of existing projects, coupled with intensified capital spend on new projects to the
value of R174.4 million (predominantly funded by cash generated from operations), has had the
anticipated effect on cash flow, but will ensure accelerated growth in the next financial year. The
majority of projects under construction are currently running cash positive.
Although capital is applied to sustain growth, the Group was successful in sweating its assets and
generating cash flow to support growth initiatives. This was demonstrated by cash on hand growing
by R67.67 million while borrowings increased by only R21.20 million.
The Group continues its approach of supporting future growth through the preservation of cash, to
fund operational activities, and maintaining the quality of the secured pipeline. Value creation was
maximised by actively managing developments and operations through the generation of cash
profits, tight cost controls and the provision of affordable homes and lifestyles to our clients.
The ability to adapt to changing market conditions remains a key focus element of the business,
enabling the Group to utilise cash where returns can be maximised. A return on equity of 33.73%
was achieved, being above the target ratio of 30%.
MEMORIAL PARKS VENTURE
The Group’s strategy for the development of Memorial Parks Venture is to develop the requisite
skills and capacity to pursue potential memorial park development opportunities on Calgro M3
owned land (property not suitable for residential development) as well as private or state owned
land. This model is viewed as a complementary business to Calgro M3’s existing business model and
will not detract from or distract Calgro M3 from the Company’s core business of property
development. This new venture also offers a further risk diversification opportunity.
SUSTAINABILITY
The Group continued to intensify its focus on sustainable business practices, embedding it into every
facet of its business through formal policies and the development of sustainable construction best
practices. Its goal to deliver sustainable human settlements was taken to the next level in the
affordable housing segment by embracing the green building concept. Rainwater harvesting and gas
reticulation (for heating and cooking), along with the development of energy-efficient approaches
will drive long-term benefits for homeowners, supporting sustainable living and sustainable
communities, while also lowering the carbon footprint of the Group.
OCCUPATIONAL HEALTH AND SAFETY
Despite growth in activity and the number of employees, the Group can again report that it is
fatality-free. Although no serious injuries occurred in the work place, any injuries sustained are
viewed in a serious light and the Group continues to strive for a zero harm target in the workplace.
PROSPECTS
The secured pipeline remains strong and continues to grow steadily. Capacity created during the
year under review will enable the Group to convert its pipeline into construction projects and build
sustainability beyond the previously indicated period of five to six years.
Investment in low to medium cost housing related infrastructure remains a key focus at all levels of
Government to address economic development, decisive spatial transformation and the acceleration
of social transformation. New initiatives, such as the Mega and Catalytic Projects Programmes
envisaged by Government will set the stage for the provision of sustainable human settlements to
be implemented on a scale previously not experienced in this country. Within the stringent
guidelines created to manage steady growth of the Group, Calgro M3 is well positioned to support
these efforts and continue to deliver value for all its stakeholders.
Statements contained in this announcement, regarding the prospects of the group, have not been
reviewed or audited by the group’s external auditors
BOARD OF DIRECTORS
The Group was able to retain the services of all Executive and Non-executive Directors of the Board.
The Board has resolved to appoint a new non-executive director and new executive directors to the
Board. An announcement detailing these appointments and further changes to the Board will be
published on SENS simultaneously with this announcement.
ANNUAL REPORT AND NOTICE OF ANNUAL GENERAL MEETING
The Integrated Annual Report and notice of annual general meeting will be posted to shareholders
on or about 25 May 2015.
The Integrated Annual Report will be available on the Company’s website (www.calgrom3.com) on
or about 11 May 2015.
APPRECIATION
We would like to thank every Calgro M3 employee whose continuous commitment and dedication is
contributing to the success of Calgro M3. We would also like to thank our stakeholders, financial and
development partners, suppliers and Government for their continued support.
Notes
1. Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements and the requirements of the Companies Act
applicable to summarised financial statements. The Listings Requirements require summarised
consolidated financial statements to be prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as
a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting
policies applied in the preparation of the consolidated financial statements from which the
summarised consolidated financial statements were derived are in terms of International Financial
Reporting Standards and are consistent with those accounting policies applied in the preparation of
the previous consolidated annual financial statements.
The consolidated 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 08 May 2015.
2. Independent audit
The summarised consolidated financial statements are extracted from audited information, but are
not itself audited. The consolidated annual financial statements were audited by
PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited
consolidated annual financial statements and the auditor’s report thereon are available for
inspection at the Company’s registered office. The directors take full responsibility for the
preparation of the summarised consolidated financial statements and the financial information has
been correctly extracted from the underlying annual financial statements.
3. Dividends
The Board of Directors has, due to the fact that Calgro M3 is in a steep growth phase, the challenging
economic climate and tough trading conditions, resolved not to declare a dividend for this reporting
period, thereby retaining the available cash to fund growth in the Group.
BP Malherbe WJ Lategan
(Chief Executive Officer) (Financial Director)
Johannesburg 11 May 2015
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.
Website: www.calgrom3.com
Date: 11/05/2015 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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