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CANCELLATION OF S371466 Audited results for the year ended 29 February 2016
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 29 FEBRUARY 2016
HIGHLIGHTS
– Operating profit up 91.2% to R160.2 million (2015: R83.8 million)
– Earnings Per Share up 33.3% to 152.77 cents (2015: 114.65 cents)
– Headline Earnings Per Share up 26.7% to 138.96 cents (2015: 109.69 cents)
– A strong pipeline to the value of R27 billion
– Net Debt to Equity at a healthy ratio of 0.59 (2015: 0.62)
– Zero fatalities
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Revenue 1 204 064 932 205
Cost of sales (952 517) (757 334)
Gross profit 251 547 174 871
Other income 19 466 8 521
Other expenses (5 757) (691)
Administrative expenses (105 089) (98 900)
Operating profit 160 167 83 801
Share of profit of joint ventures
and associates - Net of tax 67 234 86 827
Net finance income/(cost) 11 874 (2 479)
Profit before tax 239 275 168 149
Taxation (46 090) (22 520)
Profit after tax 193 185 145 629
Profit after taxation and other comprehensive income attributable to:
– Owners of the parent 194 176 145 716
– Non-controlling interests (991) (87)
Total comprehensive income 193 185 145 629
Profit after taxation attributable to:
Equity holders of the company 194 176 145 716
Earnings per share – cents 152.77 114.65
Headline earnings per share - cents 138.96 109.69
Fully diluted earnings per share
cents 150.45 114.65
Fully diluted headline earnings per
share – cents 136.85 109.69
EARNINGS RECONCILIATION
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Determination of headline and diluted headline earnings
Attributable profit 194 176 145 716
Loss/(profit) on disposal of
property 79 (83)
Gain on deemed disposal of interest
in joint venture (17 632) (6 222)
Headline and diluted headline
earnings 176 623 139 411
Determination of earnings and diluted headline earnings
Attributable profit 194 176 145 716
Earnings and diluted earnings 194 176 145 716
Number of ordinary shares (‘000) 127 100 127 100
Weighted average shares (‘000) 127 100 127 100
Fully diluted weighted average
shares (‘000) 129 062 127 100
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at as at
29 February 28 February
R’000 2016 2015
ASSETS
Non-current assets
Property, plant and equipment 3 827 1 754
Deferred income tax asset 13 788 13 825
Intangible assets 159 039 40 971
Investment in joint ventures
and associates 6 080 229 568
Investment property - 5 743
182 734 291 861
Current assets
Inventories 453 093 498 089
Construction contracts
and work in progress 923 521 212 364
Trade and other receivables 285 893 171 100
Other current assets 17 188 26 486
Cash and cash equivalents 80 071 130 565
1 759 766 1 038 604
Total assets 1 942 500 1 330 465
EQUITY AND LIABILITIES
Equity
Stated capital 96 022 96 022
Share based payment reserve 47 922 –
Retained income 676 923 482 747
820 867 578 769
Non-controlling interests (1 078) (87)
Total equity 819 789 578 682
Non-current liabilities
Deferred income tax liability 241 041 37 952
241 041 37 952
Current liabilities
Borrowings 538 463 492 132
Other current liabilities 343 207 221 699
881 670 713 831
Total liabilities 1 122 711 751 783
Total equity and liabilities 1 942 500 1 330 465
Net asset value per share - cents 645.00 455.30
Net tangible asset value
per share - cents 519.87 423.06
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Net cash generated from operating 35 511 79 177
activities
Net cash invested in investing
activities (140 533) (25 576)
Net cash from financing activities 54 528 14 072
Net increase in cash and cash
equivalents (50 494) 67 673
Cash and cash equivalents at the
beginning of the year 130 565 62 893
Cash and cash equivalents at the
end of the year 80 071 130 565
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Share Retained Total Non- Total
capital based income controlling equity
payment interests
R’000 reserve
Balance at 1 March
2014 96 022 – 337 031 433 053 – 433 053
Profit for the
Period – – 145 716 145 716 (87) 145 629
Total comprehensive
Income for year ended
28 Feb 2015 – – 145 716 145 716 (87) 145 629
Balance at 1 March
2015 96 022 – 482 747 578 769 (87) 578 682
Reclassification of
share appreciation
rights liability – 21 240 – 21 240 – 21 240
Share-based payment
expense – 26 682 – 26 682 – 26 682
Profit for the
period – – 194 176 194 176 (991) 193 185
Total comprehensive
income for year ended
29 Feb 2016 – 47 922 194 176 242 098 (991) 241 107
Balance at 29 Feb
2016 96 022 47 922 676 923 820 867 (1 078) 819 789
CONDENSED SEGMENT REPORT FOR THE GROUP
Property Professional Memorial
R’000 Development Services Parks Total
Feb 2016
Total segment revenue 1 183 418 19 990 655 1 204 063
Revenue from joint ventures
and associates 1 089 145 - - 1 089 145
Combined revenue 2 272 563 19 990 655 2 293 208
Operating profit 151 495 15 891 (1 894) 165 492
Finance costs (18 742) - (36) (18 778)
Adjusted profit before tax 132 753 15 891 (1 930) 146 714
Feb 2015 (restated)
Total segment revenue 913 081 19 123 - 932 204
Revenue from joint ventures
and associates 728 424 - - 728 424
Combined revenue 1 641 505 19 123 - 1 660 628
Operating profit 69 004 17 031 - 86 035
Finance costs (12 229) - - (12 229)
Adjusted profit before tax 56 775 17 031 - 73 806
Property Professional Memorial
R’000 Development Services Parks Total
Feb 2016
Assets per segment: 1 433 724 16 938 84 908 1 535 570
Goodwill 154 801 4 155 - 158 956
Inventories 368 185 - 84 908 453 093
Work in progress - 12 783 - 12 783
Construction contracts 910 738 - - 910 738
Feb 2015 (restated)
Assets per segment: 687 844 18 308 45 007 751 159
Goodwill 36 550 4 155 - 40 705
Inventories 453 083 - 45 007 498 090
Work in progress - 14 153 - 14 153
Construction contracts 198 211 - - 198 211
A RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX IS PROVIDED AS FOLLOWS:
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Adjusted profit before tax for
reportable segments 146 714 73 806
Group overhead costs (5 326) (2 234)
Share of profit of joint ventures
and associates 67 234 86 827
Profit before tax, finance income
and finance cost 208 622 158 399
Finance income 30 657 9 774
Profit before tax 239 275 168 149
REPORTABLE SEGMENTS’ ASSETS ARE RECONCILED TO TOTAL ASSETS AS FOLLOWS:
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Segment assets for reportable
segments 1 535 570 751 159
Unallocated:
Deferred tax 13 788 13 825
Investment property - 5 743
Property, plant and equipment 3 827 1 754
Intangible assets
Excluding goodwill 83 266
Investment in joint ventures
and associates 6 080 229 568
Loans to joint ventures 2 700 16 793
Loans and receivables - 5 757
Current tax receivable 14 488 3 936
Trade and other receivables 285 893 171 100
Cash and cash equivalents 80 071 130 565
Total assets per the consolidated
statement of financial position 1 942 500 1 330 465
REPORTABLE SEGMENTS’ LIABILITIES ARE RECONCILED TO TOTAL LIABILITIES AS FOLLOWS:
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Segment liabilities for reportable segments
Unallocated:
Borrowings 538 463 492 132
Deferred tax 241 041 37 952
Current tax 419 62
Trade and other payables 342 788 221 638
Total liabilities per the
consolidated statement
of financial position 1 122 711 751 783
RELATED PARTY TRANSACTIONS
Audited Audited
Year Ended Year Ended
29 February 28 February
R’000 2016 2015
Compensation paid to key employees
and personnel 67 448 48 667
Finance income from
related parties 22 388 6 506
Contract revenue received
from joint ventures 799 930 501 106
Service fees received
from joint ventures 21 183 9 349
COMMENTARY
NATURE OF BUSINESS
Calgro M3 is a property developer, focused on the lower end of the residential market through large-scale Integrated Developments, and the development of Memorial Parks.
INTRODUCTION
Calgro M3, for the sixth consecutive year, delivered a solid set of financial results despite difficult market conditions.
The Group’s focus over the past year was to ensure that more projects in the pipeline were converted into construction projects and thus contributed to revenue.
The Group was successful in this and currently has 12 of its 17 residential projects in the ground, ensuring that risk is sufficiently spread over projects, provinces and customer bases.
It has also launched its pilot Memorial Park project.
The secured pipeline increased from R19 billion to R27 billion. This will ensure enough construction work for the next seven to eight years.
It is the Group’s goal to extend the pipeline further and provide stakeholders with an estimated 10 year visibility.
CHANGES IN THE SEGMENTAL REPORT
During the year under review a decision was taken to align the segmental report to the Group's current and future strategic goals.
With Calgro M3 Memorial Parks starting to contribute to revenue and profit, the following three segments are reported on:
1) Property Development
2) Professional Services
3) Memorial Parks
OPERATIONAL AND FINANCIAL PERFORMANCE
Property Developments
During the year a total of 5,837 houses were constructed and 3,575 additional opportunities were serviced, bringing the total number of available serviced opportunities for
the year ahead to 6,585.
Fleurhof remains a flagship project and is recognised by the Department of Human Settlements as a premium integrated project in South Africa.
The project accounts for just over half of the current revenue of the Group.
The Jabulani CBD development and Jabulani Hostels redevelopment remain challenging projects, with delays experienced as a result of regular community action and limited availability of
bulk amenities.
However good progress was made to stabilise the situation and build community relations. This project will be a bigger contributor towards revenue during the year ahead.
With the phased infrastructure installation on the Witpoortjie, South Hills, Summerset and La Vie Nouvelle projects, a priority during the past financial year,
the Group is now well placed to enhance revenue and cash flow contributions from these projects in the year ahead and actively reduce reliance on the Fleurhof project.
Sales at the Group’s La Vie Nouvelle retirement development remained slow. After a relaunch of the development and an improved marketing plan and sales drive, sales volumes
improved substantially.
On the Scottsdene project most of the units that were sold have been constructed and handed over.
Although a fair amount of debtors were collected post financial year-end, this project made a positive contribution to the Group during the financial year.
Another good contribution is expected in the year ahead.
The first 629 units in the Belhar project are well underway, with bulk infrastructure upgrades on the future phases expected to commence during the latter part of the new financial year.
This will see an additional 3,000 units coming into the market.
The Brandwag project in the Free State is nearing completion and all regulatory approvals for the new Vista Park project have been received, making the commencement of
infrastructure installation imminent.
In Namibia the contractors are back on site after contractual delays as a result of all government funded housing projects in Namibia being placed on hold by
the Namibian Government pending an investigation by the National Department of Housing into local housing schemes.
The Calgro M3 project was cleared at the end of February 2016, with building re-commencing during March 2016.
Professional Services
The Professional Services segment continued to add value in the turnkey business model and ensured that profits from this segment were retained in the Group.
A new architectural department was added to this segment towards the end of the 2016 financial year which will result in additional value-add.
Memorial Parks
The launch of the first Memorial Park project was not without challenges, but the Group is pleased to report that sales are increasing and that it remains committed to this business as a
significant contributor in future. Marketing effort is being focused on funeral directors, who are the first port of call with respect to advising on funerals,
and great strides were made in building relationships in this area.
From a financial position, with the sales picking up, several potential bulk deals are being negotiated. The contribution to the current financial year was negligible as
sales only started increasing towards the end of the financial year.
Financial Review
A growth in revenue of 29.2% to R1.2 billion (2015: R932 million) and in combined revenue of 38.1% to R2.3 billion (2015: R1.6 billion), supported growth in operating profit and earnings.
On a segmental basis Property Development contributed 98.2%, Professional Services 1.7% and Memorial Parks 0.1% to the total revenue of the Group.
An increase in operating profit of 91.2% to R160.2 million (2015: R83.8 million) was due to the increase in revenue, in combination with the increase in the gross profit margin and
limited increase in administrative expenses.
Calgro M3 successfully acquired the remaining 30% of the Fleurhof project for a total consideration of R243 million towards the end of the financial year.
The impact of the acquisition on the Statement of Comprehensive Income sees a fair value gain on the deemed disposal of the previously held 70% shareholding in the joint venture of R17.6 million,
that is accounted for in other income (excluded from HEPS) and the corresponding goodwill of R118.3 million on the deemed acquisition of 100% of Fleurhof, which accounts for the
main increase in intangible assets. Fleurhof is accounted for as a subsidiary of the Calgro M3 Group at 29 February 2016 for statement of financial position purposes,
with income during the year remaining at a joint venture level. This acquisition resulted, amongst other, in a R702 million increase in construction contracts and work-in-progress,
and a R173 million increase in the deferred income tax liability (see 2016 Integrated Annual Report for further detail).
The gross profit margin increased from 18.8% to 20.9% due to a better mix between infrastructure installation and top structure construction across the projects in the ground.
Basic earnings per share (EPS) increased by 33.3% to 152.77 cents per share. Headline earnings per share (HEPS) increased by 26.7% to 138.96 cents per share.
The main differences between EPS and HEPS is a R17.6 million deemed fair value gain on the acquisition of the remaining 30% stake of the Fleurhof project.
Finance income increased significantly as a result of funding provided to various joint ventures through working capital where interest is charged on debtors’ balances.
This was done to fast track projects by investing in their early completion.
A further increase resulted from interest earned on debtors balance related to the sale of the four pockets of land.
This strategy remains within the realm of Calgro M3’s strategy to unlock working capital tied up in inventory.
The Fleurhof acquisition resulted in pressure on cash-on-hand at year-end, which is down 38.7%, with only R46.3 million in new debt raised during the year.
Nonetheless, the Group has sufficient short-term receivables to build up cash resources post the year-end.
The majority of the working capital increase is attributable to the acquisition of Fleurhof, where construction contracts consist of partially and installed services on future phases that
will be developed in the 2017, 2018 and 2019 financial years.
Unfortunately funds to the value of R67.5 million were not received from the registration of 184 sectional title units before year-end.
Once sectional title and property transfers are completed, cash flow is expected to increase in May 2016.
In addition, a large number of affordable units were delayed due to various external factors,
outside of the Group’s control. The total amount, in excess of R100 million, is expected to be received by end of May 2016.
These amounts, together with amounts owing from Government and amounts
from bulk transactions that only became due after year-end (for which commitments for payment before end of May 2016 have been received), will restore the Group’s healthy cash position.
Calgro M3 successfully restructured the majority of its debt maturing in the 2017 financial year in addition to the early settlement of two bonds prior to their maturity dates,
with payment made from operating cash.
Although the land portfolio is carried in the financial statements at a value of R453 million, the total external valuations of the Group’s land portfolio, excluding joint venture partner
interests, has been maintained in excess of R1.36 billion.
New Share Schemes:
During the financial year, two significant changes took place to the historical cash settled share appreciation rights (SAR) scheme. These changes included
i) the conversion of the old cash settled SAR scheme to an equity settled executive share scheme for some participants;
and ii) settlement of participants that chose not to convert to the equity settled scheme.
Refer to the Circular included in the 2015 Notice of AGM and Resolution passed in respect of the Executive Share Incentive Scheme, and 2016 Integrated Annual Report for detail.
SUSTAINABILITY
The Group remains fully committed to sustainability. A detailed Sustainability Report is available on the website at www.calgrom3.com.
PROSPECTS
It is expected that Government will slow down on infrastructure spend. In the case of housing however, it remains committed to the rollout of catalytic and mega projects
and Calgro M3 is well positioned to benefit in this regard. The acquisition of the Leratong development after year-end is a case in point, where Calgro M3 together
with McCormick Property Development and Sasuka, have joined forces to provide some 12,000 residential units.
With 12 projects in the ground at different phases and the expectation that the Vista Park, Leratong and the Kwa Nobuhle projects will commence with bulk infrastructure in the
third and fourth quarter of the new financial year, Calgro M3 is well diversified to weather difficult trading conditions.
Calgro M3 expects that economic growth will be low and that the consumer will remain under pressure. The Group remains confident in its ability to switch between product categories in order
to keep the financial performance acceptable.
Statements contained in this announcement, regarding the prospects of the Group, have not been reviewed or audited by the group’s external auditors.
SAFETY
The Group is pleased to report that from an Occupational Health and Safety perspective, it was once again fatality-free despite growth in both activity and workforce, having created in excess
of 5,000 jobs during the year. Unfortunately it was not accident-free. An incident occurred where three members of the workforce were admitted to the Milpark Hospital after an electric shock.
All three individuals have recovered. Although no further serious injuries occurred in the work place, the injuries sustained are viewed in a serious light and the Group will endeavour
to continuously aim at achieving its target of zero harm in the workplace.
PROJECT RECOGNITION
Calgro M3 again achieved high recognition for its projects, being awarded the best FLISP (Finance Linked Individual Subsidy Programme) project of the year, best social housing project and
the best integrated project of the year at the 2015 Goven Mbeki awards.
BOARD OF DIRECTORS AND OPERATIONAL MANAGEMENT
The Group retained the services of all Executive Directors of the Board with the exception of Deon Steyn that resigned in June 2015. Waldi Joubert and Wayne Williams were appointed as
Executive Directors in June 2015. John Gibbon retired as Non-executive director and chairman of the Audit Committee during January 2016, with Hugh Cameron being appointed in May 2015
to replace John upon his retirement. Venete Klein joined the Board in January 2016, bringing a far-reaching skills set that will further benefit the Group. Operational management has
been strengthened by the appointment of skills necessary to ensure that each area within the Group’s turnkey integrated development model is staffed with the correct expertise and experience.
NOTICE OF ANNUAL GENERAL MEETING AND INTEGRATED ANNUAL REPORT
Notice is hereby given that the Annual General Meeting of the Company will be held at 10h00 on 1 July 2016 at Calgro M3 Boardroom, Calgro M3 Building, Ballywoods Office Park, 33 Ballyclare Drive,
Bryanston, Sandton, whereby shareholders of the Company, will be entitled to transact business as stated in the notice of the Annual General Meeting.
The record date to participate and vote in the Annual General Meeting, in terms of section 62(3)(a), read with section 59(1)b, of the Companies Act, is Friday, 24 June 2016.
The last date to trade to be able to attend, participate and vote at the annual general meeting is Friday, 17 June 2016.
The Company’s integrated annual report containing the audited annual financial statements for the year ended 29 February 2016 and the notice of Annual General Meeting are available on the
company’s website hosted at www.calgrom3.com from today and will be posted to shareholders on or about 30 May 2016.
APPRECIATION
The production of a satisfactory set of results does not come without dedication from management, staff, contractors, suppliers and other stakeholders in the process.
Calgro M3 remains committed to “Building homes and changing lives” and will continue on this path to ensure South Africans have homes and environments which close the social gap.
Calgro M3 wishes to thank shareholders and financiers 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) and were approved by the board on 10 May 2016.
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 for ensuring that 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) (Managing Director)
Johannesburg 10 May 2016
Directors:
PF Radebe (Chairperson)*, BP Malherbe (Chief Executive Officer), WJ Lategan (Managing Director), WA Joubert (Financial Director), FJ Steyn, W Williams, V Klein*, H Ntene*,
R Patmore*, ME Gama*, HC Cameron*.
(*Independent Non-executive)
Registered office: Calgro M3 Building, 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
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