Wrap Text
Unaudited interim results for the six months ended 31 August 2017
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 2017
Overview of results
- Revenue increased 40.24% to R1.0 billion (August 2016: R720 million)
- EPS declined 26.72% to 47.71 cps (August 2016: 65.11 cps)
- HEPS declined 26.74% to 47.71 cps (August 2016: 65.13 cps)
- Net debt to equity 61.58% (February 2017: 41.82%)
- Core EPS increased 18.42% to 77.10 cps (August 2016: 65.11 cps)
* Core earnings per share ("Core EPS") - (August 2016: 65.11 cps) earnings per share before
elimination of unrealised profits from development of units to the REIT JV
- Core HEPS increased 18.38% to 77.10 cps (August 2016: 65.13 cps)
* Core headline earnings per share ("Core HEPS") - headline earnings per share before
elimination of unrealised profits from development of units to the REIT JV
- The Group is proud to announce that it was fatality free, despite growth in both employees
and sub-contractors
Commentary
Nature of business
Calgro M3 is a property developer focused on large-scale integrated residential developments
(development business), real estate investments (rental units) and the development and
establishment of private memorial parks.
Introduction
The Integrated Residential Development business continued its focus on the private sector during
the first six months of the financial year, increasing production on the AFHCO Calgro M3
Consortium (Pty) Ltd ("REIT JV") units, and other private sector units, but experienced difficult
trading conditions. Grave sales in the Calgro M3 Memorial Parks business improved, increasing by
41.0% from the previous six-month period ending 28 February 2017.
Overall growth for the development business during the first six months was subdued because of
several factors:
- Delays in capital debt raising, which took longer to conclude than expected due to the
challenging current economic environment;
- Social unrest, especially in Gauteng, also impacted performance with delays, standing time and
vandalism being experienced at almost all the Gauteng sites. Construction activities have
however recommenced on all sites;
- Construction slowdown due to the prevailing water shortage in the Western Cape.
The development business is fortunate to have 13 projects in the ground, contributing towards
revenue and profits, which reduced the impact of these delays.
It is the intention of the Group to split its operations into three different business units,
each with its own senior management team taking responsibility for the day-to-day operation of
the relevant business.
The Integrated Residential Development business was the first identified to undergo this
transition and upon implementation will be operating under the leadership of Group Executive,
Manda Nkuhlu.
The Group remains firmly committed to achieving the goal of equal profit contribution from our
three businesses, being integrated residential developments (which includes professional
services), real estate investments (rental units) and Memorial Parks, over the medium to
long term.
The integrated residential development business is investigating the possible sale or exit of
non-core strategic land parcels and projects where the risk profile has changed over time and
is no longer in line with acceptable tolerance levels. We do not anticipate any material losses
from these transactions.
Over the past six months, time was invested in identifying and securing new private sector
focused projects that are strategically better located and which will allow for more effective
application of available capital, to support future growth and diversification. These will,
however, only be reflected in the secured pipeline once agreements are concluded. The Group
remains cautious in terms of tying up too much capital in long-term projects, especially with
the increased focus on the private sector that will require all infrastructure to be installed
and funded from the balance sheet.
Management continues to investigate structures to acquire properties and projects without large
upfront capital investment, which is usually associated with a traditional outright purchase.
These structures have been successfully employed in the current and prior years, allowing
Calgro M3 to reduce overall cash flow risk.
Despite the challenges, the Group remains strategically positioned to ensure risk is optimally
mitigated and managed in these uncertain times, which sets a solid foundation for future growth.
While navigating this difficult current economic and political climate, as well as diversifying
risk across sectors and businesses, we remain focused on maintaining the underlying theme of
property development that is synonymous with Calgro M3.
Additional investments in the real estate investments and the Memorial Parks segments are well
under way to support this growth. Given the political and economic landscape in South Africa,
the short-term goal will be to build each of these businesses responsibly, while remaining
watchful of potential pitfalls.
Water-saving initiatives
Calgro M3 is driven by the principle of making South Africa a better place. This goes hand in
hand with building a sustainable business that will continue having an impact in many years to
come. Protecting our environment is a critical part of this and so the Group made the decision
earlier this year to slow down construction in the Western Cape to assist in preserving water.
Education programmes with clients are in place to ensure they understand why water conservation
is critical to the country and the environment.
The Group is extremely proud of the country wide initiatives it undertook in the past six months
to recoup the approximately 8 500 litres of water per unit that it uses through the construction
phase, both on and off-site, within three months after completion, from various water saving
initiatives introduced throughout its units. Furthermore the Nasrec Memorial Park won the
"Landscape Construction" and the "Landscape and Turf Maintenance" Water-Wise Awards at the 2017
South African Landscapers Institute Awards.
The Group will continue to develop and implement water-saving initiatives throughout the
project cycle.
Sustainability
Calgro M3 is in the process of reassessing all its sustainability policies to ensure compliance
with the ever-changing environment that the Group operates in. Independent consultants have been
appointed to assist in this process and a full-time sustainability officer will be appointed to
ensure best practice throughout the Group at all times. The sustainability focus will stretch
further than just water, and will also include energy, transport and the general environment.
Operational review
Integrated Residential Developments
During the period under review 7 473 houses were under construction and a further 1 057
(completed during the period) were handed over to customers. Due to cash flow pressure, as well
as to mitigate risk, infrastructure installation was limited. The business does, however, still
have approximately 8 000 additional serviced opportunities available for development within its
various projects. Installation of new infrastructure will be a priority, once the working capital
is secured (see International Funding section for additional information). With 13 of our
residential projects in the ground, 11 of these projects contributed towards the Group's revenue,
providing a well-diversified portfolio of projects.
Witpoortjie, Fleurhof and the South Hills projects were nominated for the prestigious Gauteng
Goven Mbeki awards. Belhar was nominated for the Western Cape Goven Mbeki awards in various
categories. We are delighted that our projects continue to be positively recognised.
Government remains committed to the roll-out of housing projects, with Calgro M3 well positioned
to benefit. The development business is in constant consultation with Government on various
future strategies, in an endeavour to assist with the housing delivery shortfall.
The development business has created critical scale in the construction of units to the private
sector through the development of the first phase rental units for the REIT JV, as well as
increased private sector sales. It realised an increase of 42.5% in secured private sector sales
compared to the comparable six-month period. In real terms the increase was substantially more,
but the tightening of credit criteria by banks and negative consumer sentiment, resulted in some
sales failing to materialise. Given market contraction by roughly 11%, the Group is pleased with
its market share increase. The "Captain Calgro" marketing campaign now includes educating
potential home owners on the possible requirement of a deposit and all other financial elements
of the bank's credit process, and this has further contributed to successful sales.
The larger construction volumes will enable Calgro M3 to further benefit from efficiencies as
discussed in the financial section. Due to the development business not taking on construction
risk, top structure construction only commences when the units are sold and therefore most of
these increased sales will only reflect in the financial performance once the units are
constructed over the next couple of months.
All town planning approvals have been received on Vista Park (Bloemfontein), Kwa Nobuhle
(Port Elizabeth) and Bridge City (KwaZulu-Natal) with Bridge City being the first of the three
new projects to go to ground in the next six months.
Construction activities in Cape Town have continued despite the continuing water shortages, with
a focus on dry works rather than wet works. The water shortages are monitored closely.
The development business's water saving initiatives will allow both forms of wet and dry
construction to resume to previous levels as soon as November 2017.
The business has decided to reduce its reliance on external contractors in the Western Cape.
This will serve to recoup some of the time lost, further drive efficiencies, capitalising on the
increased scale of projects and efficient processes already implemented in Gauteng and the
Free State. The result will be the reduction in cost and maximising of profitability on these
projects, without increasing the risk profile.
Real Estate Investments (rental units)
The Real Estate Investments business presents new opportunities in an environment where housing
is a necessity, but affordability remains a challenge. In the past Government Housing Policies
favoured ownership, but the importance of the rental sector is increasingly being acknowledged.
The first 1 372 units of the Phase 1 project in partnership with SA Corporate and AFHCO,
consisting of 3 852 units in total, are nearing completion with handover due before end of
February 2018 and the majority of the balance to be handed over in the first six months of the
next financial year.
Memorial Parks
The Memorial Parks business continues to grow, and its contribution increased to 3.2% of the
Group's profits. With grave sales steadily increasing on a weekly basis, and up 41.0% from the
previous six-month period ending 28 February 2017, we are confident that this business will
begin to contribute more significantly to profits in the full year. A sales call centre and
free WiFi with contact capturing are just a few of the initiatives being implemented to
enhance sales.
Plans to expand the business into two more provinces are well under way and the Group hopes
that an announcement will soon be made in this regard. It is critical for Memorial Parks to
have a larger footprint across South Africa to enable the business to be linked to insurance
policies that are sold. This will assist in unlocking and fast-tracking growth.
The Nasrec Memorial Park won a third award in 2017 from the South African Landscapers
Institute namely "Specialised Landscaping Construction".
Financial review
The Group's financial performance was impacted by the development business' construction of
units for the REIT JV, in which Calgro M3 has a 49% shareholding. The Group's shareholding
in the REIT JV has resulted in 49% of the development profit (construction and other
services) being eliminated on consolidation as an unrealised profit, as prescribed by
International Financial Reporting Standards ("IFRS"). This unrealised profit is carried on
the balance sheet until it realises in future financial years, once the units are completed,
tenanted and the portfolio has been revalued.
The impact of this unrealised profit is material to the financial performance and has
necessitated the Group to institute new metrics to measure operational performance between
reporting periods, as well as to give all stakeholders an indication of the Group's
performance that is consistent between periods. The below three metrics are described
as follows:
Core earnings per share ("Core EPS") - earnings per share before elimination of unrealised
profits from development of units for the REIT JV.
Core headline earnings per share ("Core HEPS") - headline earnings per share before
elimination of unrealised profits from development of units for the REIT JV.
Core operating profit - operating profit before elimination of unrealised profits from
development of units for the REIT JV as well as items that are considered once-off
in nature.
August August
Revenue reconciliation (R'000) 2017 2016 %
Revenue 1 010 069 720 233 40.24
Reversal of unrealised profit adjustment 47 078 -
Adjusted revenue 1 057 147 720 233 46.78
The increase of 40.24% in revenue to R1.010 billion (2016: R720 million) is in line with the
increase in combined revenue (Group revenue including joint ventures) of 40.84% to
R1.302 billion (2016: R925 million). Increased operations on the construction of the units for
the REIT JV, as well as construction of private sector units across projects, have contributed
to the growth in revenue and combined revenue.
The construction of units for the private sector that were sold in the prior financial year,
but on which construction was only started late in the previous financial year, has contributed
substantially to this increase. Private sector sales demand remains strong, with the Group
reflecting an increase of 42.5% in the number of private sector sales compared to the same
period in the previous year and 21.5% increase compared to the previous six months ending
28 February 2017.
August August
Gross profit % reconciliation (R'000) 2017 2016
Gross profit 134 129 180 902
Reversal of unrealised profit adjustment 47 078 -
Adjusted gross profit 181 207 180 902
Adjusted gross profit % 17.14 25.12
The adjusted gross profit percentage came under pressure due to market related sales discount
granted on bulk sale deals including units to the REIT JV. The increased construction capacity
throughout the Group only reached full efficiency in June 2017. The efficiencies will increase
over time as buying power, volume rebates and better prices start being achieved. New operational
processes are being implemented to assist in obtaining these efficiencies. The Group expects the
margin to normalise in the next 12 months as the new processes are implemented.
Administrative expenses for the period decreased by 13.1% to R58.8 million (2016: R67.7 million).
This is in line with Calgro M3's strategy of efficiencies and increased reliance on information
technology. The comparison between periods is, however, distorted by a value added tax ("VAT")
penalty of R5.6 million included in the August 2016 results, but which was disputed and reversed
at February 2017.
Administrative expenses are expected to increase substantially over the next six months' due to:
- Increased management and marketing capacity in the Memorial Park business;
- Rebranding and marketing campaigns aimed at the private sector;
- Captain Calgro educational campaign rolled out in additional provinces;
- 24/7 call centre for marketing and after-sales support with the focus on client satisfaction;
- Information technology (IT) infrastructure to support the future growth of the Group; and
- The above expenditure is necessary to support growth and ensure that sufficient capacity
and controls are in place to ensure the roll-out of the R27 billion pipeline.
August August
Core operating profit reconciliation (R'000) 2017 2016 %
Operating profit 79 469 114 413 (30.54)
Reversal of unrealised profit adjustment 47 078 -
Once-off items (VAT penalty) - 5 550
Core operating profit 126 547 119 963 5.49
Core operating profit increased 5.49% for the period to R126.5 million (2016: R120.0 million).
Earnings per share and headline earnings per August August
share reconciliation (R'000) 2017 2016 %
Profit attributable to owners of parent 61 144 82 754
Unrealised profit (net of tax and share of
profits of JVs) 37 663 -
Core profit attributable to owners of parent
("Core Earnings") 98 807 82 754
Loss/(profit) on disposal of property, plant and
equipment and computer software - 25
Core profit attributable to owners of parent
("Core Headline Earnings") 98 807 82 779
Weighted average number of ordinary shares
in issue 128 150 069 127 100 000
Basic earnings per share (cents per share) 47.71 65.11 (26.72)
Headline earnings per share (cents per share) 47.71 65.13 (26.74)
Core earnings per share (cents per share) 77.10 65.11 18.42
Core headline earnings per share (cents per share) 77.10 65.13 18.38
Basic earnings per share ("EPS") decreased by 26.72% to 47.71 cents per share (2016: 65.11 cps).
Similarly, headline earnings per share ("HEPS") decreased by 26.74% to 47.71 cents per share
(2016: 65.13 cps). The new metrics which provide additional information on the Group's
performance, core earnings per share ("Core EPS"), increased by 18.42% to 77.1 cents per share
(2016: 65.11 cps), as well as core headline earnings per share ("Core HEPS"), which increased
by 18.38% to 77.1 cents per share (2016: 65.13 cps).
Construction contracts increased by R330.2 million over the 6 month period, reflecting the
increase in construction and development of units for the REIT JV, as well as for the private
sector. The construction contracts balance is expected to increase even further until these
units are completed, registered and handed over to the purchaser. The decrease in inventories
of R86.6 million is the net effect of the Jabulani Parcel C and K units starting construction
and being transferred to construction contracts and new investments, of which investment into
the La Vie Nouvelle development of R13.7 million and the Bridge City development of
R14.3 million, was the most substantial.
The net debt to equity ratio increased over the period to 0.62 (February 2017: 0.42) as a result
of cash on hand invested in development of projects. Management believes that there is still
sufficient room to increase the gearing of the Group to support the increase in operations and
the increased exposure to the private sector. The Group is concluding several transactions that
will result in gearing increasing to 1.0 in the next few months.
Cash flow from operations came under pressure during the period due to increased construction
of REIT JV and private sector units. Positive cash flows are expected once the units are
completed and handed over. The Group has managed to refinance all notes on the Bond Exchange
programme that matured during the period and ended with an increase in capital raised of
R14 million.
International funding
The Group is proud to announce that it has secured its first international funding, a facility
for 25 million euros on an unsecured basis for a period of six years. It is the intention of
the Group to borrow in South African Rands and not to be exposed to any foreign exchange risk
on this facility. This facility is, however, suspensive on the contractual compliance with
international Health, Safety and Environmental Standards as regulated by the lender. It is
anticipated that final contracts will be signed before the end of October 2017 after which
further details will be provided. The first disbursement is anticipated in December 2017.
Prospects
Going forward, we recognise that there will be a tightening of spend across the economy.
However, the need for housing and rental opportunities is vast and given the strong pipeline,
Calgro M3 remains confident that the business remains in a strong position to continue selling
housing units, while at the same time growing the rental business.
The Memorial Parks business has shown improved growth and coupled with the marketing drive and
continued expansion, we are confident, will continue to show steady results and provide the
Group with strong annuity income.
End-user finance for our products may be at risk in future and the Group is working hard to
find ways to mitigate this risk. We are, however, still able to secure 100% bonds for our
clients across our products and banks have indicated that they do not foresee this changing
in the near future.
The same applies to finance at a Group level, which will culminate in the availability of
capital and not as much on the cost thereof. The Group will continue to assess local and
international markets to secure additional long-term instruments, as well as renew expiring
facilities, but at this stage all indications are that sufficient funding will be available.
With the construction and infrastructure currently being installed for 7 473 homes, the Group
through its development business is not only assisting with the eradication of the housing
backlog, but also assisting with job creation. Various training and skills development
programmes have been launched and will be enhanced in the next six to twelve months to support
the upliftment of our people and drive sustainability in the medium to long term.
The Group believes the biggest risk mitigation strategy for its businesses is its management
team's hands-on approach and ability to quickly adapt to change. We are confident that our
continued success will be determined by this, as well as our ability to make decisions
under pressure.
Calgro M3 is making considerable progress on empowerment and in transforming the business.
The Group is currently a Level 4 Contributor in terms of the new generic scorecard and has
worked hard onmanagement, procurement and enterprise development to improve this, with the
next rating due mid-2018.
Each business in the Group has its own challenges and risk profile, but management remains
confident that each of these risks are being addressed and that the platform to deliver
quality affordable homes, rental units and Memorial Parks that offer the best client service
and value for money products, are in place.
Disclaimer: 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 numbers.
The Group continues to strive for a safe, harm-free working environment.
Board of Directors and operational management
There were no changes to the Board of Directors during the six-month period.
Appreciation
There is no doubt that the past six months was challenging, even more so than the previous
12 months, both economically and in terms of social unrest. The tenacity, commitment and hard
work of our staff and senior management is appreciated even more in times such as this.
We are proud that our new business management teams have taken to the task so easily and that
we as a Group continue to build a business from the heart, doing the right thing, and
assisting Government in ensuring there are houses for the people of our country. The awards
received during the year are dedicated to our staff, for the hard work and commitment shown
over the years.
We would like to thank the Board for their guidance, wisdom and support, as well as our fellow
executives for the leadership role they execute across the business. We would also like to
say a special word of thanks to all our stakeholders for their continued support.
Wikus Lategan Waldi Joubert
(Chief Executive Officer) (Financial Director)
Johannesburg
16 October 2017
Unaudited Condensed Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 Notes 2017 2016 2017
Revenue 1 1 010 069 720 233 1 554 680
Cost of sales (875 940) (539 331) (1 220 517)
Gross profit 134 129 180 902 334 163
Other income 5 346 1 165 16 600
Other expenses (1 210) - (3 700)
Administrative expenses (58 796) (67 654) (118 098)
Operating profit 79 469 114 413 228 965
Share of profit of joint ventures and
associates - net of tax 5 524 5 199 6 269
Net finance income/(cost) 42 (1 011) (1 925)
Profit before tax 85 035 118 601 233 309
Taxation (24 317) (35 469) (63 176)
Profit after taxation 60 718 83 132 170 133
Profit after taxation and other
comprehensive income attributable to:
- Owners of the parent 61 144 82 754 169 156
- Non-controlling interests (426) 378 977
60 718 83 132 170 133
Profit after taxation attributable to:
Equity holders of the Company 61 144 82 754 169 156
Earnings per share - cents 2 47.71 65.11 133.06
Headline earnings per share - cents 2 47.71 65.13 133.08
Fully diluted earnings per share - cents 2 46.35 63.96 129.00
Fully diluted headline earnings per
share - cents 2 46.35 63.98 129.02
Unaudited Condensed Consolidated Statement of Financial Position
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 Notes 2017 2016 2017
Assets
Non-current assets
Property, plant and equipment 5 800 3 854 5 806
Deferred income tax asset 21 164 12 500 14 847
Intangible assets 159 673 159 016 159 690
Investment in joint ventures and associates 17 872 11 279 12 349
Investment property 6 519 - 6 519
211 028 186 649 199 211
Current assets
Inventories 3 509 347 363 424 595 990
Construction contracts and work in progress 4 1 717 732 1 151 033 1 387 537
Trade and other receivables 5 290 122 235 670 276 198
Other current assets 59 073 34 351 45 054
Cash and cash equivalents 57 399 70 545 240 765
2 633 673 1 855 023 2 545 544
Total assets 2 844 701 2 041 672 2 744 755
Equity and liabilities
Equity
Stated capital 116 256 96 022 116 256
Share-based payment reserve 71 447 61 263 60 847
Retained income 907 224 759 677 846 079
1 094 927 916 962 1 023 182
Non-controlling interests (527) (700) (101)
Total equity 1 094 400 916 262 1 023 081
Non-current liabilities
Deferred income tax liability 327 314 274 636 302 358
327 314 274 636 302 358
Current liabilities
Borrowings 585 751 525 503 571 646
Other current liabilities 6 837 236 325 271 847 670
1 422 987 850 774 1 419 316
Total liabilities 1 750 301 1 125 410 1 721 674
Total equity and liabilities 2 844 701 2 041 672 2 744 755
Net asset value per share - cents 854.00 720.90 798.35
Net tangible asset value per share - cents 729.40 595.79 673.73
Unaudited Condensed Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 2017 2016 2017
Cash generated from operating activities
Cash generated from operations (150 020) 130 953 292 068
Finance income 3 441 9 129 16 727
Finance cost (34 664) (31 835) (63 167)
Tax paid (5 203) (14 022) (7 444)
Net cash generated from operating activities (186 446) 94 224 238 184
Cash flows invested in investing activities
Purchase of property plant and equipment (451) (520) (867)
Purchase of intangible assets - - (52)
Acquisition of business (750) - (4 500)
Acquisition of subsidiary - (93 000) (93 000)
Loans advanced to joint ventures and associates (9 724) (3 674) (18 472)
Net cash invested in investing activities (10 925) (97 194) (116 891)
Cash flows from financing activities
Proceeds of borrowings 57 005 104 000 239 809
Repayment of borrowings (43 000) (117 063) (206 915)
Equity received in advance - 6 507 6 507
Net cash from financing activities 14 005 (6 556) 39 401
Net (decrease)/increase in cash and
cash equivalents (183 366) (9 526) 160 694
Cash and cash equivalents at the beginning
of the year 240 765 80 071 80 071
Cash and cash equivalents at end of the year 57 399 70 545 240 765
Unaudited Condensed Consolidated Statement of Changes in Equity
Share-
based Non-
Stated payment Retained controlling Total
R'000 capital reserve income Total interests equity
Balance at 1 March 2016 96 022 47 922 676 923 820 867 (1 078) 819 789
Share-based payment
expense - 13 341 - 13 341 - 13 341
Comprehensive income
Profit for the period - - 82 754 82 754 378 83 132
Other comprehensive income - - - - - -
Total comprehensive income - - 82 754 82 754 378 83 132
Balance at 31 August 2016 96 022 61 263 759 678 916 962 (700) 916 262
Balance at 1 March 2017 116 256 60 847 846 080 1 023 183 (101) 1 023 082
Share-based
payment expense - 10 600 - 10 600 - 10 600
Comprehensive income
Profit for the period - - 61 144 61 144 (426) 60 718
Other comprehensive income - - - - - -
Total comprehensive income - - 61 144 61 144 (426) 60 718
Balance at 31 August 2017 116 256 71 447 907 224 1 094 927 (527) 1 094 400
Unaudited Condensed Segment Report for the Group
Property Professional Memorial
R'000 Development Services Parks Total
August 2017
Total segment revenue 1 004 870 1 5 198 1 010 069
Revenue from joint ventures
and associates 227 335 - - 227 335
Revenue from third parties 777 535 1 5 198 782 734
Revenue of joint ventures
and associates 292 228 - - 292 228
Combined revenue 1 297 098 1 5 198 1 302 297
Operating profit 83 537 (4 458) 2 932 82 011
Finance costs (10 825) - (140) (10 965)
Adjusted profit before tax 72 712 (4 458) 2 792 71 046
August 2016
Total segment revenue 718 288 858 1 087 720 233
Revenue from joint ventures
and associates 42 456 858 - 43 314
Revenue from third parties 675 832 - 1 087 676 919
Revenue of joint ventures
and associates 204 447 - - 204 447
Combined revenue 922 735 858 1 087 924 680
Operating profit 116 967 (604) (254) 116 109
Finance costs (10 110) - (30) (10 140)
Adjusted profit before tax 106 857 (604) (284) 105 969
August 2017
Assets per segment 2 252 285 8 045 135 309 2 395 639
Goodwill 154 801 4 155 695 159 651
Investment property - - 6 519 6 519
Property, plant and equipment - - 2 391 2 391
Inventories 383 642 - 125 704 509 346
Work in progress - 3 890 - 3 890
Construction contracts 1 713 842 - - 1 713 842
February 2017
Assets per segment 2 014 212 8 045 129 844 2 152 101
Goodwill 154 801 4 155 695 159 651
Investment property - - 6 519 6 519
Property, plant and equipment - - 2 404 2 404
Inventories 475 764 - 120 226 595 990
Work in progress - 3 890 - 3 890
Construction contracts 1 383 647 - - 1 383 647
Additional Information
A reconciliation of adjusted profit/(loss) before tax is provided as follows:
Unaudited Unaudited
six months six months
31 August 31 August
R'000 2017 2016
Adjusted profit before tax for reportable segments 71 046 105 969
Group overhead cost (2 542) (1 695)
Share of profit of joint ventures and associates 5 524 5 199
Total before finance income/(cost) 74 028 109 473
Net finance income/(cost) 11 007 9 128
Profit before tax 85 035 118 601
Reportable segment assets are reconciled to total assets as follows:
Unaudited Audited
six months year ended
31 August 28 February
R'000 2017 2017
Segment assets for reportable segments 2 395 639 2 152 101
Unallocated:
Deferred tax 21 164 14 847
Property, plant and equipment 3 409 3 401
Intangible assets excluding goodwill 22 40
Investment in joint ventures and associates 17 873 12 349
Loans to joint ventures 36 174 26 451
Current tax receivable 22 899 18 603
Trade and other receivables 290 122 276 198
Cash and cash equivalents 57 399 240 765
Total assets per the consolidated statement of financial position 2 844 701 2 744
Reportable segment liabilities are reconciled to total liabilities as follows:
Unaudited Audited
six months year ended
31 August 28 February
R'000 2017 2017
Segment liabilities for reportable segments - -
Unallocated:
Borrowings 585 751 571 646
Deferred tax 327 314 302 358
Current tax 88 9
Trade and other payables 837 148 847 661
Total liabilities per the consolidated statement
of financial position 1 750 301 1 721 674
Notes
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 2017 2016 2017
1. Revenue
Sale of completed units 6 269 1 140 14 090
Construction contracts 998 601 717 095 1 536 123
Total Construction contract revenue 1 045 679 717 095 1 537 299
Reversal of unrealised profit adjustment* (47 078) - (1 176)
Professional services 1 912 150
Memorial parks burial rights 4 872 1 067 3 850
Memorial parks maintenance 115 20 48
Memorial parks burial services 211 - 419
1 010 069 720 233 1 554 680
* The unrealised profit adjustment consists of profits that are generated on the
development/construction of units to the Afhco Calgro M3 Consortium (Pty) Ltd (REIT JV),
in which Calgro M3 have a 49% shareholding that is eliminated on consolidation.
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 2017 2016 2017
2. Earnings reconciliation
Determination of headline and
diluted earnings
Attributable profit 61 144 82 754 169 156
Loss on disposal of property - 25 25
Headline and diluted headline earnings 61 144 82 779 169 181
Determination of earnings
and diluted earnings
Attributable profit 61 144 82 754 169 156
Earnings and diluted earnings 61 144 82 754 169 156
Number of ordinary shares ('000) 128 150 127 100 128 150
Weighted average shares ('000) 128 150 127 100 127 126
Fully diluted weighted average shares ('000) 131 918 127 384 131 127
3. Inventories
Opening balance 595 990 453 093 453 093
Additions (Net of transfers to
construction contracts) (89 165) (99 575) 137 668
Borrowing costs capitalised 10 146 10 994 21 398
Disposals (7 624) (1 088) (16 169)
Closing balance 509 347 363 424 595 990
4. Construction contracts and work in progress
The aggregate costs incurred and
recognised profits to date 9 022 833 6 740 392 7 987 134
Less: Progress billings (7 322 485) (5 608 260) (6 609 752)
Net statement of financial position balance
for ongoing contracts 1 700 348 1 132 132 1 377 382
Excess billings over work done classified
under trade and other payables 13 494 6 118 6 265
Statement of financial position balance
for ongoing contracts 1 713 842 1 138 250 1 383 647
Work in progress 3 890 12 783 3 890
Total Construction contracts and
work in progress 1 717 732 1 151 033 1 387 537
5. Trade and other receivables
Trade receivables and retention debtors 233 920 214 177 213 332
Trade receivables - third parties 10 739 48 287 11 434
Retention debtors - third parties 13 864 4 700 7 021
Trade receivables - related parties 134 227 79 685 119 526
Retention debtors - related parties 1 642 5 314 1 903
Trade receivables - land sales 73 448 76 191 73 448
Value Added Tax 31 974 1 753 44 137
Other receivables 15 836 7 471 9 578
Share appreciation rights
settlement prepayment 873 5 675 1 747
Amounts due from share
scheme - related parties 7 116 6 150 7 001
Securing deposits 403 444 403
290 122 235 670 276 198
6. Other current liabilities
Trade payables 272 446 191 404 227 610
Trade payables - related parties 9 965 - 9 965
Retention creditors 21 688 26 276 20 546
Accrued expenses 11 839 20 896 19 454
Executive share scheme liability 34 552 38 836 34 552
Share appreciation rights liabilities 2 316 1 809 1 976
Value added tax 829 5 433 13 970
Income received in advance 365 2 235 365
Deferred revenue 8 641 - 7 815
Deposits received 214 044 2 500 287 455
Land purchase liability - balance of
purchase price for acquisition of Jabulani
and Kwa Nobuhle land 208 386 - 189 730
Other payables - balance of purchase
price for acquisition of Fourways Private
Memorial Parks 13 665 - 14 665
Other payables - related parties 24 918 29 292 13 293
Excess billings over work done 13 494 6 118 6 265
Current income tax liabilities 88 472 9
837 236 325 271 847 670
Unaudited Unaudited
six months six months
31 August 31 August
R'000 2017 2016
7. Related party transactions
Compensation paid to key employees and personnel 16 112 20 080
Finance income from related parties 6 810 4 895
Contract revenue received from joint ventures 227 335 42 511
Services fees received from joint ventures - 858
8. Basis of preparation
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council and the requirements
of the Companies Act of South Africa. The accounting policies applied in the preparation of
these interim financial statements are in terms of International Financial Reporting Standards
and are consistent with those applied in the previous consolidated annual financial statements.
The consolidated financial statements were internally compiled by UK Kissoon Singh CA(SA) and
M Esterhuizen CA(SA) under the supervision of WA Joubert CA(SA) and were approved by the Board
on 13 October 2017.
9. Independent audit
These condensed consolidated interim financial statements have not been audited or reviewed
by the Group's external auditors.
10. Financial instruments
The carrying value of all financial instruments are equal to the fair value of those
instruments at 31 August 2017 with the exception of borrowings. The carrying value of
borrowings at 31 August 2017 was R585.8 million, with a corresponding fair value of
R596.3 million. The difference is attributable to these bonds trading in an active market and
are classified as level 2 in the IFRS 13 fair value hierarchy.
11. Bond Exchange
During the period ended 31 August 2017, the Group repaid R43 million in borrowings that
matured, as well as raised a total of R57 million in a combination of one and
three-year notes.
Subsequent to 31 August 2017, another R136 million in a combination of one and
three-year instruments were successfully raised as well as R49 million repaid that matured.
Total finance cost incurred for the period amounted to R34.7 million
(August 2016: R31.8 million) of which R23.7 million (August 2016: R21.8 million) was
capitalised to inventory and construction contracts.
12. Dividends
Management believes that cash should be retained to fund growth across the Group.
Cash retention is important to ensure investment in future projects, as well as reduced
reliance on debt finance. The Board has therefore resolved not to declare a dividend for this
reporting period.
Directors
PF Radebe (Chairperson)*#
WJ Lategan (Chief Executive Officer)
FJ Steyn
WA Joubert (Financial Director)
W Williams
VJ Klein*#
H Ntene*#
RB Patmore*#
ME Gama*#
BP Malherbe*
Auditors
MN Nkuhlu
HC Cameron*#
* Non-executive # Independent
Registered office
Calgro M3
Ballywoods Office Park
33 Ballyclare Drive
Bryanston
2196
Private Bag X33, Craighall, 2024
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers
15 Biermann Avenue
Rosebank
2196
PO Box 61051, Marshalltown, 2107
Sponsor
Grindrod Bank Limited
Website
http://www.calgrom3.com
Date: 16/10/2017 07:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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