To view the PDF file, sign up for a MySharenet subscription.

CALGRO M3 HOLDINGS LIMITED - Audited results for the year ended 28 February 2015

Release Date: 11/05/2015 07:05
Code(s): CGR     PDF:  
Wrap Text
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'). 
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.

Share This Story