Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 August 2018
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 condensed consolidated interim results
for the six months ended 31 August 2018
- Acquisition of Durbanville and Bloemfontein (Avalon) Memorial Parks
- Acquisition of minority shareholding in Nasrec Memorial Park
- Memorial Park sales increased by 128.24%
- Basic earnings per share ('EPS') decreased by 50.16% to 23.78 cents per share ('cps')
- Headline earnings per share ('HEPS') decreased by 93.48% to 3.11 cps
- Level 1 B-BBEE contributor
- Second tranche of international funding secured: R109 million
Commentary
Nature of business
Calgro M3 is a property and property-related investment company that is a market leader in the
development of Integrated Residential Developments, Residential Rental Investments and the
development and management of Memorial Parks.
Background to impacts on the business
The period under review was one of the most difficult ever experienced due to:
(1) Macro and micro economic uncertainty coupled with uncertainty pertaining to land expropriation;
(2) Scottsdene and Fleurhof projects being shut down as a result of 'illegal occupation' with
additional security and repair cost amounting to approximately R65.2 million;
(3) Major electrification challenges on Fleurhof which resulted in standing time cost of roughly
R14.5 million;
(4) Impact of the adoption of IFRS 15;
(5) Drought in the Western Cape; and
(6) Cancellation of the executive share scheme and corresponding fast-tracked expense of
R44.0 million.
A variation order of R93.3 million was received on Fleurhof that slightly offset the impact of
the above.
The above challenges had a negative impact on our operational cash flow, leading to the
deliberate slowdown in levels of activity on other sites.
Despite all of these uncertainties and challenges, management has worked tirelessly to ensure that
the Company has:
- A healthy balance sheet;
- 10 projects in the ground at various phases; and
- Expanded its Memorial Parks business.
It is important to note that neither the accounting change for revenue recognition (based on the
principles of IFRS 15), nor the various current short-term challenges in the operational
environment have a long-term impact on the underlying fundamentals of the business or any of its
integrated development projects.
Value
Management's assessment on the net tangible asset value of R3.6 billion, excluding approximately
600 000 m2 bulk retail, commercial and industrial properties across the portfolio (see page 6 of
the Integrated Annual Report 2018 available on the website: http://www.calgrom3.com), has not changed and
is not affected by the IFRS 15 adjustment.
Our medium to long-term commitment to shareholders
Management strategically aligned the Group to ensure we remain committed to the targeted return on
equity ('ROE') of 30% over the medium term. Our commitment is based on the following:
- Residential Property Development pipeline of R25.3 billion with a targeted ROE of 30%;
- Memorial Parks pipeline increasing to R2.2 billion with a targeted ROE > 30%; and
- Real Estate Investment ('REIT') with a targeted ROE of 20.5% (annual rental yield plus revaluation
growth) on an estimated Group equity investment of R4 billion.
Operational review
Residential Property Developments
The development business has 10 projects in the ground, contributing to revenue which has made the
impact of delays more manageable. 3 377 units were under construction during the period, while
1 843 units (of which 934 are fully subsidised) were handed over.
With in excess of 8 000 serviced opportunities (refer to table on page 4), the Group remains well
positioned to assist Government in the eradication of the housing backlog in times when Governmental
budget is available.
Our variable cost model, adopted by our projects, was thoroughly tested during this period where
certain sites had to be temporarily closed as a result of the challenges that were experienced.
The temporary closure of sites is accompanied by practical execution challenges such as securing a
site that is geographically widely spread out. The implementation of the required actions are far
more complex and costlier than originally anticipated. Terminating sub-contractor employment in times
when employment is scarce, and unemployment is on the rise, was disconcerting and morally challenging
to say the least. Even though the scaling back of the variable costing model was not as efficient as
management would have liked, lessons were learnt which will ensure that similar actions would be much
more systematic and efficient in future.
The primary areas of focus for the Property Development Business remains the roll-out of the existing
pipeline, capitalising on the private sector sales drive, enhancing the product offering, while at the
same time remaining focused on improving efficiencies. Despite challenges, the Group remains
strategically positioned to ensure risk is optimally mitigated and managed in these uncertain times,
which creates a solid foundation for future growth.
Subsidised GAP/FLISP Rental Affordable Mid to High Total
Units handed over during
the period 934 140 696 67 6 1 843
Units under construction
as at 31 August 2018 32 850 2 249 154 92 3 377
Units sold - construction
to commence 955 1 495 235 236 92 3 013
Project pipeline - projects in progress/under construction
Part
Total Under serviced
number con- Services and un-
Project of units struction Serviced underway serviced Construction update
32-On-Pine Expect to go to ground
59 - - - 59 March 2019
Belhar CBD Construction well underway
- should reach full capacity
3 558 1 069 2 489 - - February 2019
Bridge City Planned commencement
356 - - - 356 January 2019
Fleurhof Electrification challenges
caused delays and the site
4 416 1 105 2 365 350 596 was closed from May to date
Jabulani CBD Last phase to commence
432 48 384 - - November 2018
Jabulani
Hostels 325 64 261 - - Delayed
Jabulani Top structure construction
parcel K to commence November 2018.
Will be slow start with
1 410 - 696 714 - December builders holiday
KwaNobuhle Engineer's designs being
12 964 - - - 12 964 finalised
La Vie Construction well underway
Nouvelle - should reach full capacity
191 92 99 - - February 2019
Mid to High
Cluster land 255 - - - 255 Alternates being investigated
Scottsdene Site closed since Easter
weekend until mid-October
999 682 317 - - 2018
South Hills 4 149 264 1 370 564 1 951 Construction well underway
Tanganani 11 624 - - - 11 624 Townplanning underway
Umhlanga
Hills 1 376 - - - 1 376 Townplanning underway
Vista Park 5 320 - - - 5 320 Bulk services commenced
Vredehoek Heritage commission
260 - - - 260 approval underway
Summerset Underway - services were
and delayed due to cash
Witpoortjie 5 034 53 146 - 4 835 preservation
52 728 3 377 8 127 1 628 39 596
Memorial Parks
The Memorial Parks business' sales continued to grow on a monthly basis with 649 grave and niche
sales being achieved for the six months under review, compared to 947 for the whole of the
previous financial year. Instalment sales were also made during the period, but is only
recognised as a sale (and revenue) once the full purchase price is received from the customer.
The target for this business for the second six months is to grow sales with a further
80% to 100%.
The national roll-out plan is advancing rapidly, through the acquisition of the Durbanville
Memorial Park in Cape Town on 1 March 2018 and the Avalon Memorial Park in Bloemfontein on
1 June 2018. The Eastern Cape and KwaZulu-Natal are targeted provinces for expansion, planned
for early in the 2020 financial year.
Residential Rental Investments
696 units were handed over to the Afhco Calgro M3 Consortium (REIT JV) during the past
six months. Rental take-up has been slower than expected but is increasing steadily. Management
is still confident that its targeted 10.5% rental yield and 6% capital growth, that gives rise
to a 10% capital growth on equity, will be achieved as can be seen under the financial section
below. Calgro M3 remains confident in the rental market and believes the affordable rental
market has immense potential.
This rental market strategy further assists Government in eradicating the housing backlog
without exposing the Group to diminishing public sector spending.
The first 40 of 480 units that were acquired from an external developer were handed over to the
REIT JV on 15 October 2018. In view of the slow rental uptake referred to above, the hand-over
pace of these units was re-negotiated and extended by a further six months to ensure an effective
tenanting process. The units will be geared to 60% with no additional cash equity contribution
required by Calgro M3. The Group already has sufficient equity into the development to ensure that
there is no additional equity contribution required.
Financial review
The financial results for the six-month period ended 31 August 2018 was overwhelmed with several
operational challenges and transactions, coupled with changes in accounting standards (outlined in
the transitional report published on 27 September 2018). This makes a direct comparison between
periods extremely difficult. Please refer to note 3 for details on the effect of the changes in
accounting standards.
Statement of comprehensive income
As detailed in the transitional report, IFRS 15 impacted the method and timing of revenue
recognition. Revenue comparison between periods presented should, not be performed as the Group has
elected not to restate the comparative information as permitted by IFRS 15. Accordingly, the impact
of IFRS 15 has been applied using the modified retrospective restatement method allowed under the
standard resulting in an adjustment to the Group's opening retained earnings on 1 March 2018.
Therefore, comparative information on revenue will not be amended for the impact of IFRS 15.
Please refer to note 3 for revenue comparison between the different accounting standards.
Unrealised profit
The Group's financial performance was impacted by the construction of units for the REIT JV, in
which Calgro M3 has a 49% shareholding. This shareholding 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 realised in future financial years, once the units are completed,
tenanted and the portfolio is revalued.
The impact of this unrealised profit on the financial performance necessitated the institution of
new metrics to measure operational performance between reporting periods. This further provides an
indication of performance which is then consistent between periods. The three pertinent metrics are
described as:
- 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; and
- Core operating profit - Operating profit before elimination of unrealised profits from development
of units for the REIT JV.
If revenue was accounted for under the previous accounting standards, revenue would have been
R657.0 million, resulting in a 34.95% decrease from the R1.010 billion reported in the previous
period. Combined revenue (under the previous accounting standards) decreased by 37.4% to
R815.7 million (August 2017: R1.3 billion) due to the slowdown in operations as outlined in the
operational update above.
The main contributing projects to combined revenue were South Hills at 45.9% (August 2017: 38.5%),
Belhar at 8.5% (August 2017: 14.7%) and Fleurhof at 31.1% (August 2017: 20.8%).
The illegal invasion and occupation of units in Fleurhof and Scottsdene resulted in extensive damage
and extraordinary high security costs incurred in order to secure the units. These costs
(approximately R65.2 million) were expensed or provided for in the period under review. Insurance
and related claims were submitted and will be accounted for once confirmation or approval on the
amount and timing is received. Total claims submitted are:
- Fleurhof - R36.3 million
- Scottsdene - R21.0 million
In response to the negative impact of the adoption of IFRS 15 and IFRS 9 on the net debt/equity
ratio, and the impact that this increased ratio has on the Group's future gearing ability, the
participants of the Executive Share Scheme unanimously agreed to forfeit the scheme (even though it
is deeply in the money) in the 2019 financial year to enhance the equity of the Group through the
reversal of the share-based payment reserve to retained earnings. The cancellation of the scheme
resulted in the remaining expense on the scheme being fast-tracked through profit and loss in the
current year, increasing administrative expenses.
The share-based payment reserve of R118 million, after the acceleration of the expense
(February 2018: R74.1 million) was reversed to retained income after the cancellation of the scheme.
The additional increase in administrative expenses of 55.51% from the previous period is due to an
increase in:
- Marketing and advertising* - 55.82% (increase from R5.2 million to R8.1 million), being in line
with the strategy to increase open market residential and Memorial Park sales;
- Salaries and wages - 25.0% (increase from R22.3 million to R27.9 million) - Increased staff
capacity which includes additional senior management and professional appointments, health, safety
and environmental staff as well as site-based employees. Capacity building began in September 2017,
leaving a mismatch between periods. Revenue has not yet evidenced a corresponding increase, due to
the primary focus being placed on systems and efficiencies.
- Professional fees - 303.31% (increase from R1.6 million to R6.6 million) arising from professional
capacity created to assist with project management mentoring, land invasions as well as an
electrical specialist for Fleurhof.
Finance income continued to increase as a result of the increase in debtors and shareholder loan
balances (on which interest is being earned) on the South Hills, Witpoortjie and Tanganani projects,
which are all accounted for as joint ventures ('JVs') within the Group. Finance income is also
earned on the loan to the Afhco Calgro M3 Consortium. The increase in the loan balance by
R147.1 million to R249.4 million (February 2018: R102.3 million) represents the Group's equity
contribution that will convert to equity before the end of the 2019 financial year. This is for the
units completed and handed over to the REIT JV during the period.
The share of profit of joint ventures and associates is mainly attributable to the South Hills joint
venture. This profit recognition was also impacted by IFRS 15 within the joint venture itself. The
total equity accounted profit on 1 March 2018 (once IFRS 15 opening balance adjustments were made),
was a mere R249 683. Total profit after tax in South Hills at 31 August 2018 was R26.4 million, of
which the Group accounted 42.5%, being R8.6 million after the elimination of unrealised profit.
Outstanding debtor balances to South Hills were settled after 31 August 2018.
The South Hills project now has a total of 222 affordable units, 536 GAP/FLISP and 612 fully
subsidised opportunities available where services are fully installed.
The finance cost expense has increased largely due to increased working capital requirements and the
cessation of interest capitalisation on Memorial Parks.
Basic earnings per share ('EPS') decreased by 50.16% to 23.78 cps (August 2017: 47.71 cps).
Similarly, headline earnings per share ('HEPS') decreased by 93.48% to 3.11 cps (August 2017:
47.71 cps). The new metrics introduced in the prior financial year provide additional information on
the Group's performance. Core earnings per share ('Core EPS') decreased by 82.62% to 13.40 cps
(August 2017: 77.10 cps), and core headline earnings per share ('Core HEPS') decreased by 109.43% to
-7.27 cps (August 2017: 77.10 cps).
* Calgro M3 is still receiving 100% bonds from all the major banks but tightening on credit criteria
is influencing the approval and conversion rate.
August August
R 2018 2017
Core earnings per share
Profit attributable to shareholders 30 473 319 61 144 217
Add: (Realised)/unrealised profit (net of tax and share of profits of JVs) (13 298 054) 37 662 687
Core profit attributable to owners of parent ('core earnings') 17 175 265 98 806 904
Weighted average number of ordinary shares in issue 128 150 069 128 150 069
Core earnings per share (cents per share) 13.40 77.10
Core headline earnings per share
Profit used to determine headline earnings per share 3 984 716 61 144 217
Add: (Realised)/unrealised profit (net of tax and share of profits of JVs) (13 298 054) 37 662 687
Core Headline profit attributable to owners of parent ('core headline
earnings') (9 313 338) 98 806 904
Weighted average number of ordinary shares in issue 128 150 069 128 150 069
Core headline earnings per share (cents per share) (7.27) 77.10
The earnings on the residential rental investments is split between the interest received and equity
accounting due to the shareholder loan that has not yet been converted to equity.
Statement of financial position
The Group acquired the Durbanville Memorial Park in Cape Town and the Avalon Memorial Park in
Bloemfontein in the past six months. The acquisitions resulted in an increase in investment property,
property, plant and equipment, investments (not for profit company/restricted investments),
inventories and trade and other payables.
The restricted investment is the cash investment in a fully registered non-profit organisation
('NPO'), specifically created to ensure the in-perpetuity maintenance of the Durbanville Memorial
Park and can only be utilised for this purpose. The Group is currently exploring amending the purpose
of the NPO vehicle and converting it into a vehicle to attend to the in-perpetuity maintenance of all
the Memorial Parks across the Group. More information will be provided once the Group has completed
its investigation.
The Group acquired the remaining shareholding from the minority shareholder in Nasrec Memorial Park
(36.5% shareholding) for R63.6 million during this interim period. R15.9 million has been paid and
the remaining balance, which carries no interest, will be settled over the next three years in equal
annual instalments.
The Group secured R109 million as a second tranche of international funding in June 2018, from
Societe De Promotion Et De Participation Pour La Coop�ration Economique ('Proparco') S.A, a
subsidiary of Agence Fran�aise De D�veloppement ('AFD'). The balance of the facility was received
after certain international environmental and health and safety compliance requirements were
successfully achieved.
The net debt to equity ratio increased to 1.16 (February 2018: 0.75). The increase is mainly
attributable to the changes in opening retained earnings as a result of the IFRS 15 and IFRS 9
adoption that is detailed in the transitional report and the financial section of this report.
The ratio further increased due to increased debt levels, the acquisition of the minority stake
in Nasrec Memorial Park and a cash balance that declined from year-end. This ratio is still below
the covenant level of 1.5. The Group's weighted average cost of debt is currently at 11.18%.
Unaudited Audited
six months year ended
31 August 28 February
2018 2018
Net debt to equity ratio* 1.16 0.75
Covenant 1.5 1.5
Debt service cover ratio ('DSCR')# 1.84 1.57
Covenant 1.2 1.2
* Please refer to note 14 for definitions and calculation.
# Please refer to note 14 for definitions and calculation.
R62 million of debt that matured was repaid by the Group after 31 August 2018, thereby reducing
borrowings to R990.6 million.
Cash flow
Cash flow from operations came under pressure during the period due to the deliberate slowdown in
operations by management following the challenges experienced on various projects. This was
compounded by slower than anticipated handover of units to the REIT JV, together with the temporary
slowdown/closure of the Fleurhof and Scottsdene projects and the associated security and repair costs
required due to illegal invasions.
Unaudited
six months
31 August
R 2018
Total cost to complete remaining units (318 945 653)
Total funds to be received on completion 921 515 429
Less: Deposit (158 378 377)
444 191 399
Less: Equity contributions to the REIT JV (309 276 635)
Total cash upside upon completion 134 914 764
During the period, the Group invested very little into new infrastructure in an effort to reduce
pressure on working capital.
What does the future hold for Calgro M3?
Our strategy is to enable the extraction of multiple sources of revenue and profits from business and
opportunities along the turnkey property development value chain, which will lead to an improved
operating margin blend and the creation of annuity income.
It remains the Group's strategy that the three segments contribute evenly to profitability in the
future. This strategy can only be achieved if the capital base grows annually by capitalising and
gearing profits, rather than paying dividends. The longer-term aim is to have all operating
expenditure for the Group, paid from businesses other than the residential development business. The
optimal application of capital between new opportunities, working capital and risk capital will remain
an important strategic decision as capital allocations are made across this
horizontal value chain.
As reported, our variable costing principle was tested in the last six months. The Group believes
that it is critical that all residential development business activities are closely monitored and
that the ability to make quick decisions to manage and control risk will be instrumental in reducing
the potential impact thereof.
The Group is currently only investigating some memorial parks in Tshwane
and KwaZulu-Natal, one new residential development project as well as some potential properties to be
acquired and developed for the REIT. The internal focus is on rolling out the current projects that
the Group has secured in its pipeline. Alternative uses for some of the mid to high-end land parcels
are being investigated to improve the cash generation cycle, with no anticipated losses from these
possible conversions expected.
Transformation goes beyond compliance with legislation and regulation. Our goal is to create a truly
transformed organisation where people are empowered to fulfil their purpose. We acknowledge that the
broader transformation of society cannot take place unless large companies such as Calgro M3 play a
major role therein. We are proud to be a level 1 BBBEE contributor.
We are expecting the effect of the challenges and delays to continue towards the end of the
financial year. Once the challenges are resolved the time required to reach full operational
capacity will be three to four months per site. The uncertainties and corresponding increase in
security, standing time and holding costs are placing strain on operational cash flows. The board
has analysed the cash flows for the Group and will continue to monitor the actual cash flows against
the forecast to ensure that appropriate and timeous action is taken should any material
deviation occur.
The Group is cautious in the current uncertain environment and careful consideration will be given
to what the best use of cash is on each project to ensure sustainable long-term return and value
for shareholders.
Health, safety and environmental initiatives
Calgro M3 remains committed to health and safety standards of the highest level as well as
minimising the negative impact of any operations on the environment. The development and enforcement
of policies and procedures is being undertaken by the health and safety manager with assistance from
the environmental manager.
The Group is extremely proud to announce that the 2019 financial year to date has been fatality-free.
Board of Directors
During the period George Hauptfleisch was appointed as an independent non-executive director and
chairperson of the audit and risk committee, effective 6 June 2018.
Wikus Lategan Pumla Radebe
Chief Executive Officer Chairperson
Johannesburg
19 October 2018
Date of announcement: 22 October 2018
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 2018 2017 2018
Revenue 3.3, 3.4.1 628 612 1 010 069 1 742 602
Cost of sales (524 331) (875 940) (1 472 513)
Gross profit 104 281 134 129 270 089
Other income 30 522 5 346 12 922
Administrative expenses (110 117) (58 796) (131 775)
Net impairment losses on financial and
contract assets 3.6.2 (1 436) - -
Other expenses - (1 210) (1 310)
Operating profit 23 250 79 469 149 926
Net finance income/(cost) (4 246) 42 12 269
Share of profit of joint ventures and
associates - net of tax 8 211 5 524 9 561
Profit before tax 27 215 85 035 171 756
Taxation 2 497 (24 317) (50 949)
Profit after taxation 29 712 60 718 120 807
Other comprehensive income - - -
Total comprehensive income 29 712 60 718 120 807
Profit after taxation and other
comprehensive income attributable to:
- Owners of the parent 30 474 61 144 120 351
- Non-controlling interests (762) (426) 456
29 712 60 718 120 807
Profit after taxation attributable to:
Equity holders of the Company 30 474 61 144 120 351
Earnings per share - cents 4 23.78 47.71 93.91
Headline earnings per share - cents 4 3.11 47.71 90.12
Fully diluted earnings per share - cents 4 23.78 46.35 92.00
Fully diluted headline earnings per
share - cents 4 3.11 46.35 88.29
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 2018 2017 2018
ASSETS
Non-current assets
Investment property 13 444 6 519 8 879
Property, plant and equipment 9 684 5 800 6 163
Intangible assets 159 690 159 673 159 664
Financial assets at fair value through profit
and loss 10 607 - -
Investment in joint ventures and associates 32 895 17 872 41 909
Deferred income tax asset 2 746 21 164 23 999
229 066 211 028 240 614
Current assets
Loans to joint ventures and associates 288 348 36 174 143 422
Inventories 5 644 484 509 347 554 397
Current tax receivable 16 207 22 899 16 600
Construction contracts 6 1 319 782 1 713 842 1 820 974
Work in progress - 3 890 -
Trade and other receivables 281 053 290 122 293 739
Cash and cash equivalents 103 897 57 399 156 723
2 653 771 2 633 673 2 985 855
Total assets 2 882 837 2 844 701 3 226 469
EQUITY AND LIABILITIES
Equity
Equity attributable to owners of the parent
Stated capital 116 256 116 256 116 256
Share-based payment reserve - 71 447 74 056
Retained income 722 539 907 224 977 015
838 795 1 094 927 1 167 327
Non-controlling interests 1 529 (527) 355
Total equity 840 324 1 094 400 1 167 682
Liabilities
Non-current liabilities
Deferred income tax liability 201 559 327 314 354 283
201 559 327 314 354 283
Current liabilities
Borrowings 1 052 585 585 751 889 597
Current income tax liabilities 632 88 23
Trade and other payables 787 737 837 148 814 884
1 840 954 1 422 987 1 704 504
Total liabilities 2 042 513 1 750 301 2 058 787
Total equity and liabilities 2 882 837 2 844 701 3 226 469
Unaudited condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 2018 2017 2018
Cash (utilised in)/generated from operations 3 565 (150 020) (205 839)
Finance income 3 904 3 441 6 686
Finance cost (47 009) (34 664) (75 747)
Tax refunded/(paid) (328) (5 203) (1 478)
Cash (utilised in)/generated from operations (39 868) (186 446) (276 378)
Cash flows invested in investing activities
Purchase of property, plant and equipment (4 060) (451) (1 579)
Proceeds from the sale of property, plant and
equipment - - 243
Purchase of investment property (4 565) - (2 360)
Purchase of intangible assets (39) - (7)
Acquisition of business (16 250) (750) (2 500)
Acquisition of subsidiary - - 52
Increase in investments with joint ventures - - (10 000)
Loans advanced to joint ventures and associates (136 145) (9 724) (113 381)
Net cash utilised in investing activities (161 059) (10 925) (129 532)
Cash flows from financing activities
Proceeds of borrowings 255 000 57 005 516 000
Repayment of borrowings (91 000) (43 000) (192 000)
(Repayment)/proceeds from issue of shares for
Calgro M3 executive scheme - - (2 132)
Transactions with non-controlling Interest (15 900) - -
Net cash from financing activities 148 100 14 005 321 868
Net (decrease)/increase in cash and
cash equivalents (52 827) (183 366) (84 042)
Cash and cash equivalents at the beginning of
the year 156 723 240 765 240 765
Cash and cash equivalents at the end of the year 103 896 57 399 156 723
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 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
Balance at 1 March 2018 116 256 74 056 977 015 1 167 327 355 1 167 682
Investment in Calgro M3 Memorial
Parks eliminated to equity - - (56 850) (56 850) 1 936 (54 914)
IFRS 15 adjustment to equity - - (317 063) (317 063) - (317 063)
IFRS 9 adjustment to equity - - (29 085) (29 085) - (29 085)
Share-based payment expense - 43 992 - 43 992 - 43 992
Share-based reserve released
to retained earnings - (118 048) 118 048 - - -
Comprehensive income -
Profit for the period - - 30 474 30 474 (762) 29 712
Other comprehensive income - - - - - -
Total comprehensive income - - 30 474 30 474 (762) 29 712
Balance at 31 August 2018 116 256 - 722 539 838 795 1 529 840 324
Unaudited condensed segment report for the Group
Holding Residential Residential
August 2018 company/ Property Memorial Rental
R'000 unallocated Development Parks Investments Total
Total segment revenue - 616 748 11 864 - 628 612
Fleurhof Project - 245 060 - - 245 060
Jabulani Project - 31 998 - - 31 998
Witpoortjie Project - 28 910 - - 28 910
South Hills Project - 216 427 - - 216 427
Belhar Project - 66 975 - - 66 975
Third parties - 27 378 11 864 - 39 242
Timing of revenue recognition - 616 748 11 864 - 628 612
- Point in time - 94 913 10 578 - 105 491
- Over time - 521 835 1 286 - 523 121
Combined revenue* - 775 475 11 864 - 787 339
Total segment revenue - 616 748 11 864 - 628 612
Revenue of joint ventures and
associates - 158 727 - - 158 727
Witpoortjie Project - 13 395 - - 13 395
South Hills Project - 145 332 - - 145 332
Revenue - 616 748 11 864 - 628 612
Cost of sales - (519 119) (5 212) - (524 331)
Gross profit - 97 629 6 652 - 104 281
Other income 26 489 1 730 2 044 259 30 522
Administrative expenses (46 117) (59 036) (4 964) - (110 117)
Net impairment losses on financial
and contract assets - (539) - (897) (1 436)
Other expenses - - - - -
Operating profit (19 628) 39 784 3 732 (638) 23 250
Finance income 428 14 425 42 10 758 25 653
Finance costs - (19 680) (4 916) (5 303) (29 899)
Share of profit/(loss) of
associates/joint venture - net of tax - 8 503 - (292) 8 211
Profit before tax (19 200) 43 032 (1 142) 4 525 27 215
Taxation 12 559 (11 168) 1 808 (702) 2 497
Profit after taxation (6 641) 31 864 666 3 823 29 712
Other comprehensive income - - - - -
Total comprehensive income (6 641) 31 864 666 3 823 29 712
* Combined revenue is the total segment revenue plus the total revenue of joint ventures and
associates. The revenue included represents the gross revenue of each joint venture and does not
include any inter-group eliminations.
Holding Residential Residential
August 2018 company/ Property Memorial Rental
R'000 unallocated Development Parks Investments Total
Profit after taxation and other
comprehensive income
attributable to:
- Owners of the parent (6 641) 32 742 550 3 823 30 474
- Non-controlling interests - (878) 116 - (762)
(6 641) 31 864 666 3 823 29 712
Non-current assets
Investment property - - 13 444 - 13 444
Property, plant and equipment - 3 490 6 194 - 9 684
Intangible assets - 158 995 695 - 159 690
Investment in joint ventures
and associates - 32 678 - 217 32 895
Investments - - 10 607 - 10 607
Deferred income tax asset - - 2 475 4 287 6 762
- 195 163 33 415 4 504 233 082
Current assets
Loans to joint ventures and
associates - 39 797 - 248 551 288 348
Inventories - 444 740 199 744 - 644 484
Current tax receivable 276 15 736 195 - 16 207
Construction contracts - 1 319 782 - - 1 319 782
Trade and other receivables 1 057 278 712 833 451 281 053
Cash and cash equivalents 23 924 79 139 834 - 103 897
25 257 2 177 906 201 606 249 002 2 653 771
Total assets 25 257 2 369 053 235 021 253 506 2 886 853
Liabilities
Non-current liabilities
Deferred income tax liability - 205 575 - - 205 575
- 205 575 - - 205 575
Current liabilities
Borrowings - 872 636 86 570 93 379 1 052 585
Current income tax liabilities - 66 - 566 632
Trade and other payables 1 304 680 170 106 263 - 787 737
1 304 1 552 872 192 833 93 945 1 840 954
Total liabilities 1 304 1 758 447 192 833 93 945 2 046 529
August 2017
Total segment revenue - 1 004 871 5 198 - 1 010 069
Fleurhof Project - 270 520 - - 270 520
Jabulani Project - 151 185 - - 151 185
Witpoortjie Project - 9 371 - - 9 371
South Hills Project - 217 965 - - 217 965
Belhar Project - 191 150 - - 191 150
Third parties - 164 680 5 198 - 169 878
Combined revenue* - 1 297 098 5 198 - 1 302 297
Total segment revenue - 1 004 871 5 198 - 1 010 069
Revenue of joint ventures and
associates - 292 228 - - 292 228
Witpoortjie Project - 8 737 - - 8 737
South Hills Project - 283 491 - - 283 491
Revenue - 1 004 871 5 198 - 1 010 069
Cost of sales - (873 479) (2 461) - (875 940)
Gross profit - 131 392 2 737 - 134 129
Other income - 4 443 903 - 5 346
Administrative expenses (2 548) (55 038) (1 210) - (58 796)
Net impairment losses on financial
and contract assets - - - - -
Other expenses - (1 210) - - (1 210)
Operating profit (2 548) 79 587 2 430 - 79 469
Finance income 5 10 996 6 - 11 007
Finance costs - (10 825) (140) - (10 965)
Share of profit/(loss) of associates/
joint venture - net of tax - 5 524 - - 5 524
Profit before tax (2 543) 85 282 2 296 - 85 035
Taxation (83) (23 872) (362) - (24 317)
Profit after taxation (2 626) 61 410 1 934 - 60 718
Other comprehensive income - - - - -
Total comprehensive income (2 626) 61 410 1 934 - 60 718
* Combined revenue is the total segment revenue plus the total revenue of joint ventures and
associates. The revenue included represents the gross revenue of each joint venture and does not
include any inter-group eliminations.
Holding Residential Residential
August 2017 company/ Property Memorial Rental
R'000 unallocated Development Parks investments Total
Profit after taxation and other
comprehensive income
attributable to:
- Owners of the parent (2 626) 61 174 2 596 - 61 144
- Non-controlling interests - 236 (662) - (426)
(2 626) 61 410 1 934 - 60 718
Non-current assets
Investment property - - 6 519 - 6 519
Property, plant and equipment - 3 409 2 391 - 5 800
Intangible assets - 158 978 695 - 159 673
Investment in joint ventures
and associates - 17 872 - - 17 872
Investments - - - - -
Deferred income tax asset 83 19 467 1 614 - 21 164
83 199 726 11 219 - 211 028
Current assets
Loans to joint ventures and
associates - 36 174 - - 36 174
Loans to group companies - - - - -
Inventories - 383 643 125 704 - 509 347
Current tax receivable - 22 899 - - 22 899
Construction contracts - 1 713 842 - - 1 713 842
Work in progress - 3 890 - - 3 890
Trade and other receivables 197 284 906 5 019 - 290 122
Cash and cash equivalents 11 57 352 36 - 57 399
208 2 502 706 130 759 - 2 633 673
Total assets 291 2 702 432 141 978 - 2 844 701
Liabilities
Non-current liabilities
Deferred income tax liability - 327 314 - - 327 314
- 327 314 - - 327 314
Current liabilities
Borrowings 585 751 - - - 585 751
Current income tax liabilities - - 88 - 88
Trade and other payables 1 018 812 572 23 559 - 837 149
586 769 812 572 23 647 - 1 422 988
Total liabilities 586 769 1 139 886 23 647 - 1 750 302
Notes to the unaudited condensed consolidated interim financial statements
1. Basis of preparation
1.1 Statement of compliance
The condensed consolidated interim financial statements have been 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 condensed consolidated interim financial statements have been prepared by M Esterhuizen
CA(SA) under the supervision of WA Joubert CA(SA).
The condensed consolidated interim financial statements should be read in conjunction with
the Group annual financial statements as at and for the year ended 28 February 2018, which
have been prepared in accordance with IFRS as issued by the IASB. The interim financial
statements have been prepared on the historical cost basis, excluding financial instruments,
which are measured at fair value. This is the first set of interim financial statements
where IFRS 9 and IFRS 15 have been applied. Changes to significant accounting policies are
described in note 3.
No event that is material to the financial affairs of the Group has occurred between the
reporting date and the date of approval of the condensed consolidated interim
financial statements.
The condensed consolidated interim financial statements were not reviewed or audited by the
Group's external auditors.
The condensed consolidated interim financial statements of the Calgro M3 Group were
authorised for issue by the board of directors on 19 October 2018.
1.2 Judgements and estimates
Management made judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income and expense.
Actual results may differ from these estimates. The significant judgements made by
management in applying the Group's accounting policies and the key source of estimation
uncertainty were similar to those applied to the Group annual financial statements as at
and for the year ended 28 February 2018, except for new significant judgements related to
the adoption of IFRS 9, and IFRS 15 which are described in note 3.2 and 3.5.
2. Accounting policies
The accounting policies adopted in the preparation of the condensed consolidated interim financial
statements are consistent with those followed in the preparation of the Group annual financial
statements asat and for the year ended 28 February 2018, except for the adoption of new or amended
standards as set out below.
2.1 New or amended standards adopted by the Group
A number of new or amended standards became effective for the current reporting period.
The Group has adopted the following new standards, which are relevant to the Group, for the
first time for the six-month period commencing on 1 March 2018:
- IFRS 9: Financial Instruments (IFRS 9)
- IFRS 15: Revenue from Contracts with Customers (IFRS 15).
The adoption of these standards has resulted in the Group changing its accounting policies.
The impact of the adoption and the new accounting policies are disclosed in note 3.
3. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 and IFRS 15 on the interim financial
statements.
3.1 Impact on the financial statements
Prior year financial statements did not have to be restated as a result of the changes in
the Group's accounting policies due to the adoption of IFRS 9 and IFRS 15. As explained in
note 3.2 and 3.5 below, IFRS 15 and IFRS 9 were adopted without restating comparative
information.
Below is an illustration of the impact on the unaudited condensed consolidated statement of
comprehensive income and unaudited condensed consolidated statement of financial position.
Unaudited condensed consolidated statement of comprehensive income impact analysis:
As reported Adjustments Adjusted
Unaudited
Unaudited Adjustment Adjustment six months
six months from the from the 31 August
31 August adoption of adoption 2018 before
R'000 2018 IFRS 15 of IFRS 9 adoption
Revenue 628 612 28 389 - 657 001
Cost of sales (524 331) (7 509) - (531 840)
Gross profit 104 281 20 880 - 125 161
Other income 30 522 - - 30 522
Administrative expenses (110 117) - - (110 117)
Net impairment losses on
financial and contract assets (1 436) - 1 436 -
Other expenses - - - -
Operating profit 23 250 20 880 1 436 45 566
Net finance income/(cost) (4 246) - - -
Share of profit of joint ventures
and associates - net of tax 8 211 - - -
Profit before tax 27 215 20 880 1 436 45 566
Taxation 2 497 (5 846) (402) (3 751)
Profit after taxation 29 712 15 034 1 034 41 814
Other comprehensive income - - - -
Total comprehensive income 29 712 15 034 1 034 41 814
Profit after taxation and other
comprehensive income
attributable to:
- Owners of the parent 30 474 15 034 1 034 41 814
- Non-controlling interests (762) - - (762)
29 712 15 034 1 034 41 052
Earnings per share - cents 23.78 11.73 0.81 36.32
Headline earnings per share
- cents 3.11 11.73 0.81 15.65
Fully diluted earnings per share
- cents 23.78 11.73 0.81 36.32
Fully diluted headline earnings
per share - cents 3.11 11.73 0.81 15.65
ASSETS
Non-current assets
Investment property 13 444 - - 13 444
Property, plant and equipment 9 684 - - 9 684
Intangible assets 159 690 - - 159 690
Financial asset at fair value through
profit and loss 10 607 - - 10 607
Investment in joint ventures and
associates 32 895 - - 32 895
Deferred income tax asset 2 746 - - 2 746
229 066 - - 229 066
Current assets
Loans to joint ventures and associates 288 348 - 1 037 289 385
Inventories 644 484 - - 644 484
Current tax receivable 16 207 - - 16 207
Construction contracts 1 319 782 20 880 442 1 341 104
Trade and other receivables 281 053 - (43) 281 010
Cash and cash equivalents 103 897 - - 103 897
2 653 771 20 880 1 436 2 676 087
Total assets 2 882 837 20 880 1 436 2 905 153
EQUITY AND LIABILITIES
Equity
Equity attributable to owners of
the parent
Stated capital 116 256 - - 116 256
Retained income 722 539 15 034 1 034 738 606
838 795 15 034 1 034 854 862
Non-controlling interests 1 529 - - 1 529
Total equity 840 324 15 034 1 034 856 391
Liabilities
Non-current liabilities
Deferred income tax liability 201 559 5 846 402 207 807
201 559 5 846 402 207 807
Current liabilities
Borrowings 1 052 585 - - 1 052 585
Current income tax liabilities 632 - - 632
Trade and other payables 787 737 - - 787 737
1 840 954 - - 1 840 954
Total liabilities 2 042 513 5 846 402 2 048 761
Total equity and liabilities 2 882 837 20 880 1 436 2 905 153
3.2 Impact of adoption of IFRS 15: Revenue from Contracts with Customers
The revenue accounting policy has changed with effect from 1 March 2018 as a result of the
Group adopting IFRS 15.
IFRS 15 supersedes IAS 18 (Revenue), IAS 11 (Construction Contracts) and related
interpretations for annual periods beginning on or after 1 January 2018. IFRS 15 applies to
all revenue arising from contracts with customers, unless those contracts are in the scope
of other standards. IFRS 15 establishes a comprehensive framework for determining whether,
how much and when revenue is recognised, providing additional guidance in many areas not
covered in detail under the previous revenue standards and interpretations. The standard
requires entities to exercise judgement, taking into consideration all of the relevant
facts and circumstances when applying the framework to the contracts with customers.
The standard also specifies the accounting treatment for the incremental costs of obtaining
a contract and the costs directly related to fulfilling a contract. IFRS 15 further includes
extensive new disclosure requirements.
Refer note 3.4 for the Group's revised revenue accounting policy as well as revenue
treatment of each product type. Refer to note 3.4.1 for the disaggregated revenue disclosure
required by IFRS 15.
As permitted by IFRS 15 the Group has elected not to restate the comparative information.
Accordingly, the impact of IFRS 15 has been applied using the modified retrospective
restatement method allowed under the standard resulting in an adjustment to the Group's
opening retained earnings on 1 March 2018. The comparative information presented for 2018 is
therefore presented as previously reported applying the previous revenue standards and
interpretations.
The cumulative effect of the retrospective application on the Group's retained earnings as
at 1 March 2018 is as follows:
Unaudited
six months
31 August
R'000 2018
Closing balance at 28 February 2018 (IAS 39/IAS 11/IAS 18) 977 015
IFRS 15 adjustment to equity (317 063)
Opening retained earnings at 1 March 2018 (after IFRS 15 restatement, before
IFRS 9 restatement) 659 952
3.3 Financial results for the six-month period ended 31 August 2018 had IAS 11/IAS 18
been applied
IAS 11
Unaudited Unaudited Unaudited
six months six months six months
31 August IAS 11 31 August 31 August
R'000 2018 adjustment 2018 2017
Sale of completed units 3 783 - 3 783 6 269
Construction contracts 612 965 28 389 641 354 998 602
Memorial parks burial rights 9 893 - 9 893 4 872
Memorial parks maintenance services 1 286 - 1 286 115
Memorial parks burial services 685 - 685 211
628 612 28 389 657 001 1 010 069
The impact of the IFRS 15 adoption in the current year is illustrated for the condensed
consolidated statement of comprehensive income and statement of financial position in
note 3.1.
3.4 Accounting policies applied from 1 March 2018
The Group derives revenue from contracts with customers for the supply of goods
(infrastructure, fully and partially subsidised units, non-subsidised units, serviced land
and memorial park burial rights) and services (memorial park burial services and memorial
park maintenance).
Revenue is measured based on the consideration specified in the contract with a customer
excluding any amounts received on behalf of third parties and is recognised when it
transfers control of the goods or services to a customer.
The Group measures and accounts for revenue based on the specifications of each individual
contract with a customer and based on the contractual obligations either accounts for the
revenue at a specific point in time or over time as control of the goods or services are
transferred to the customer.
Type of product Treatment under IAS 11/IAS 18 New treatment under IFRS 15
Fully subsidised Individual contract with revenue Individual contract treatment
(reconstruction and recognised based on % with revenue recognised over
development programme completion (IAS 11)* time#
('RDP')/breaking new
ground ('BNG'))
Subsidised rental
- Community residential Individual contract with revenue Individual contract treatment
units ('CRU') recognised based on % with revenue recognised over
completion (IAS 11)* time#
- Social housing Individual contract with revenue Individual contract basis
recognised based on % treatment revenue recognised
completion (IAS 11)* over time#
Bulk buyer/real estate Individual contract with revenue Individual contract treatment
investment trust recognised based on % with revenue recognised
('REIT')/funds completion (IAS 11)* either at a point in time or
over time#
Grassroots affordable Individual contract per customer Individual contract per
peoples' homes ('GAP')/ with revenue recognised on customer with revenue
finance linked transfer of completed unit recognised on transfer of
individual subsidy (IAS 18)* completed unit - revenue
programme('FLISP') recognised at a point in time
Affordable housing Individual contract per customer Individual contract per
with revenue recognised on customer with two performance
transfer for the land to the obligations. Revenue
customer (IAS 18) and based recognised on transfer of
on % completion for the theland to the customer at a
construction of the unit (IAS 11)* point in time. Revenue on
construction of the unit to
be recognised over time
High-end units Individual contract per customer Individual contract per
with revenue recognised on customer with two performance
transfer for the land to the obligations. Revenue
customer (IAS 18) and based recognised on transfer of the
on % completion for the land to the customer at a
construction of the unit (IAS 11)* point in time. Revenue on
construction of the unit to
be recognised over time
Integrated residential Accounted for as a single, Every contract with a customer
developments (consisting combined contract on % to be recognised and accounted
of a mix of bulk, link completion basis (IAS 11) for individually (as per above)
and internal at a point in time or over
infrastructure together time depending on the terms
with a mix in unit and conditions contained in
typologies as outlined the contract with a customer
above)
Memorial Parks burial The sale of burial rights relates Individual contract treatment
rights to revenue generated from the with revenue recognised at a
reservation of a grave site. point in time when control of
Individual contract per customer burial right has transferred
with revenue recognised on to the customer
transfer of burial right to the
customer once full payment has
been received (IAS 18)
Memorial Parks burial The burial services relates to Individual contract treatment
services the revenue generated from the with revenue recognised at a
interment services provided by point in time when the burial
the Group. Individual contract service has been rendered to
per customer with revenue the customer
recognised on transfer of burial
services rendered to the
customer (IAS 18)
Memorial Parks The maintenance services relate Individual contract treatment
maintenance services to the revenue generated from with revenue recognised over
the memorial park maintenance time as the maintenance
provided by the Group for the services are being rendered
reserved graves. Individual for the customer
contract per customer with
revenue recognised over the
period of maintenance being
provided (IAS 18)
* Based on an individual contract basis as if treated as a separate engagement and not part
of an integrated development.
# Exact treatment will be assessed based on the individual contract with the customer and
the underlying terms and conditions that are unique to each contract. Revenue may in
certain cases be recognised at a point in time rather than over time and may have more
than one performance obligation as determined by IFRS 15. Each will be assessed on its
own set of underlying facts and recognised according to the guidance contained in IFRS 15.
3.4.1 Disaggregated revenue disclosure required by IFRS 15
Unaudited
six months
31 August
R'000 2018
Infrastructure 262 870
Fully and partially subsidised units 304 659
Non-subsidised units 40 382
Serviced land sales 8 837
Memorial parks burial rights 9 893
Memorial parks maintenance services 1 286
Memorial parks burial services 685
628 612
3.5 Impact of adopting IFRS 9
IFRS 9 replaces IAS 39: Financial Instruments: Recognition and Measurement (IAS 39) for
annual periods beginning on or after 1 January 2018. IFRS 9 brings together all aspects of
accounting for financial instruments that relate to the recognition, classification and
measurement, derecognition, impairment and hedge accounting.
The adoption of IFRS 9 from 1 March 2018 resulted in changes in accounting policies and
adjustments to the amounts recognised in the financial statements. The new accounting
policies are set out in note 3.6 below. Comparative information has not been restated in
accordance with the transitional requirements of IFRS 9 which requires comparative
information not to be restated (with an exception where it is possible to restate without
the use of hindsight) but for disclosures to be made concerning the reclassifications and
measurements as set out below.
The adoption of IFRS 9 has had the following effect on the Group:
- Change from the IAS 39 incurred loss model to the expected credit loss ('ECL') model to
calculate impairments of financial instruments.
- Change in classification of the measurement categories for financial instruments.
Under IFRS 9 the Group calculates allowance for credit losses as ECLs for financial
assets measured at amortised cost, debt investments at fair value through other
comprehensive income ('FVOCI') and contract assets. ECLs are a probability weighted
estimate of credit losses. Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the Group expects to receive). ECLs are
discounted at the original effective interest rate ('EIR') of the financial asset.
Due to the nature of the Group's financial instruments, a simplified approach could not
be followed.Instead a judgemental approach (non-statistical) was adopted with the use of established
credit techniques.
The expected credit losses calculations took into consideration various scenarios and
were weighted against stage of completion of a relevant project and taking into
consideration the distance from budget and current economic conditions.
The total impact on the Group's retained earnings as at 1 January 2018 is as follows:
Unaudited
six months
31 August
2018
Opening balance at 1 March 2018 (after IFRS 15 before IFRS 9 restatement)
(refer to note 3.2) 659 952
Adjustments from the adoption of IFRS 9 (ECL adjustments) (29 085)
Trade receivables 3 513
Contract assets 22 249
Loans to joint ventures 3 323
Opening retained earnings at 1/3/2018 (after IFRS 9 and IFRS 15 restatement) 630 867
3.6 Accounting policies applied from 1 March 2018
3.6.1 Classification and measurement
(i) Classification
IFRS 9 largely retains the existing requirements in IAS 39 for the
classification and measurement of financial liabilities. However, IFRS 9
eliminates the previous IAS 39 categories of held to maturity, loans and
receivables and available-for-sale financial assets.
The accounting for the Group's financial liabilities remains largely the same
as it was under IAS 39.
Under IFRS 9, on initial recognition, a financial asset is classified as
measured at:
- Amortised cost;
- Fair value through other comprehensive income ('FVOCI');
- FVOCI equity investment; or
- Fair value through profit or loss ('FVPL').
The classification of financial assets under IFRS 9 is generally based on the
business model in which a financial asset is managed and its contractual cash
flows characteristics.
There are no change in classification on the opening balances of financial
assets measured at amortised cost.
(ii) Measurement
Financial assets
At initial recognition, the Group measures a financial asset at its fair
value plus, in the case of financial asset not at FVPL, transaction cost that
are directly attributable to the acquisition of the financial asset.
Transaction cost of financial assets carried at FVPL are expensed in profit
or loss.
Interest income from these financial assets are included in finance income
using the effective interest rate method.
Any gain or loss arising on the derecognition is recognised directly in
profit or loss and presented in operating expenses.
Financial liabilities
At initial recognition the Group measures a financial liability at fair value
less any transaction cost capitalised to the financial liability at initial
recognition.
All of the Group's financial liabilities are classified as 'financial
liabilities at amortised cost' and are therefore subsequently measured at
amortised cost.
Equity instruments
Equity instruments are subsequently measured at fair value, where the Group's
management has elected to present fair value gains and losses through OCI,
there is no subsequent reclassification of fair value gains and losses to
profit or loss following derecognition of the investment. Dividends from such
investments continue to be recognised in profit or loss as income from
financial assets when the Group's right to receive payments is established.
Changes in fair value of the financial assets at FVPL are recognised in
operating expenses in the statement of comprehensive income as applicable.
(iii) Impairment
From 1 March 2018, the Group assesses on a forward looking basis the ECLs
associated with its financial asset instruments carried at amortised cost.
The impairment methodology applied depends on whether there has been a
significant increase in credit risk. Credit losses are measured as the
present value of all cash shortfalls (i.e. the difference between the cash
flows due to the entity in accordance with the contract and the cash flows
that the Group expects to receive). ECLs are discounted at the original EIR
of the financial asset.
All gains and losses relating to ECLs are recognised through profit and loss.
3.6.2 Expected credit losses
Unaudited
1 March 2018 six months
opening 31 August
R'000 balance* Movement 2018
Trade receivables 4 880 (43) 4 837
Contract assets 30 901 442 31 343
Loans to joint ventures 3 323 1 037 4 360
39 104 1 436 40 540
* Opening balances were adjusted according to the modified retrospective approach
on 1 March 2018 and adjustments included in retained earnings.
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 2018 2017 2018
4. Earnings reconciliation
Determination of headline and diluted earnings
Attributable profit 30 474 61 144 120 350
Loss/(profit) on disposal of property, plant
and equipment and computer software - - (170)
Gain on deemed disposal of interest in
joint venture - - (6 000)
Impairment of goodwill - - 1 310
Gain on bargain purchase (26 490) - -
Headline and diluted headline earnings 3 984 61 144 115 490
Determination of earnings and diluted earnings
Attributable profit 30 474 61 144 120 350
Earnings and diluted earnings 30 474 61 144 120 350
Number of ordinary shares 128 150 128 150 128 150
Weighted average shares 128 150 128 150 128 150
Fully diluted weighted average shares 128 150 131 918 130 813
5. Inventories
Opening balance 554 397 595 989 595 989
Additions (net of transfers to contract assets) 85 278 (89 165) (49 627)
Borrowing cost capitalised 8 622 10 146 24 567
Disposals (3 813) (7 623) (16 532)
644 484 509 347 554 397
6. Construction contracts
The aggregate costs incurred and recognised
profits to date 10 063 283 9 022 833 9 786 724
Less: Progress billings (8 744 518) (7 322 485) (7 970 169)
Net statement of financial position balance for
ongoing contracts 1 318 765 1 700 348 1 816 555
Excess billings over work done classified under
trade and other payables 1 017 13 494 4 419
Statement of financial position balance for
ongoing contracts 1 319 782 1 713 842 1 820 974
Unaudited
6 months
31 August
2018
Analysis of contract assets in terms of IFRS 15
Infrastructure 401 352
Fully and partially subsidised units 671 683
Non-subsidised units 40 710
Serviced land 206 037
1 319 782
Unaudited Unaudited Audited
six months six months year ended
31 August 31 August 28 February
R'000 2018 2017 2018
7. Related-party transactions
Compensation paid to key employees and
personnel* 49 034 16 112 34 409
Finance income from related parties 12 668 6 810 15 791
Contract revenue received from joint ventures 245 337 227 335 485 166
* A mounts include executive share scheme expense that was accelerated and cancelled on
31 August 2018.
The Group entered into various sale and purchase transactions with associates and joint
ventures during the ordinary course of business. These transactions were subject to terms that
are no less, nor more favourable than those arranged with independent third parties.
8. Financial instruments
The carrying value of all financial instruments are equal to the fair value of those
instruments at 31 August 2018 with the exception of borrowings. The carrying value of
borrowings at 31 August 2018 was R1.053 billion, with a corresponding fair value of
R1.089 billion. The difference is attributable to the bonds trading in an active market and
are classified as level 2 in the IFRS 13 fair value hierarchy.
9. Bond Exchange
During the period ended 31 August 2018, the Group repaid R91 million in borrowings that
matured, as well as raised a total of R146 million in a combination of three and five-year
notes. Subsequent to 31 August 2018, R62 million was repaid that matured.
Total finance cost incurred for the period amounted to R59.8 million (August 2017:
R34.7 million) of which R29.9 million (August 2017: R23.7 million) was capitalised to
inventory and construction contracts.
10. 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.
11. Going concern
Based on the latest results for the six-month period ended 31 August 2018, the latest board
approved budget for 2019, as well as the available bank facilities and cash generating
capability, Calgro M3 satisfies the criteria of a going concern.
12. JSE Listings Requirements
The unaudited condensed consolidated interim financial statements have been prepared in
accordance with the Listings Requirements of the JSE.
13. Corporate governance
Corporate governance forms one of the foundational layers of the Calgro M3 strategy as we
understand that transparency, integrity and accountability need to permeate everything that
we do. The board of directors endorse the principles contained in King IV�. Calgro M3's
application of these principles are set out in the 2018 integrated report and has been, in
accordance with the JSE Listings Requirements, available on the Company's website since
May 2018. Please contact Ms I April, Group company secretary, for any additional information.
14. Ratio calculations
Net debt/equity ratio
This ratio is calculated as net debt divided by equity. Net debt is calculated as total cash
interest-bearing borrowings less cash and cash equivalents. Equity is calculated as the total
equity per the statement of financial position (excluding share-based payment reserve).
Unaudited Audited
six months year ended
31 August 28 February
R'000 2018 2018
Net debt
Borrowings 1 052 585 889 597
Other interest-bearing borrowings 28 350 71 599
Less: Cash and cash equivalents (103 897) (240 765)
977 038 720 431
Equity
Stated capital 116 256 116 256
Retained income 722 539 846 079
838 795 962 335
Net debt/equity ratio 1.16 0.75
The maximum allowed net debt:equity ratio for the Group is 1:5.
Debt service cover ratio ('DSCR')
The Group monitors capital repayments of interest serviceability on the basis of its debt
service cover ratio ('DSCR'). The minimum allowed DSCR for the Group is 1.2.
This ratio is calculated as available cash flow divided by debt service requirement. Available
cash flow is calculated as net cash generated from operating activities plus new financial
indebtedness incurred plus cash and cash equivalent at the beginning of the year plus capital
expenditure (including investments into associates and joint ventures). Debt service
requirement is calculated as interest and fees plus principal repayments.
Unaudited Audited
six months year ended
31 August 28 February
R'000 2018 2018
Available cash flow
Net cash generated from operating activities 3 564 (205 839)
New financial indebtedness incurred 255 000 516 000
Cash and cash equivalent beginning of year 156 723 240 765
Capital expenditure (161 058) (129 533)
254 229 421 393
Debt service requirement
Interests and fees 47 009 75 747
Principal repayments 91 000 192 000
138 009 267 747
Debt service cover ratio ('DSCR') 1.84 1.57
Proparco requirements
The Group monitors capital from Proparco on the basis of its debt service cover ratio and its net
debt/equity ratio (as above). The minimum allowed debt service cover ratio for the Group is 1.2
and the net debt/ equity ratio of below 1.5:1.
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*
MN Nkuhlu
G Hauptfleisch*#
* Non-executive
# Independent
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
Rosebank Towers
15 Biermann Avenue
Rosebank
2196
PO Box 61051, Marshalltown, 2107
Sponsor
Grindrod Bank Limited
Company secretary
I April
Auditors
PricewaterhouseCoopers Inc.
Website
http://www.calgrom3.com
Disclaimer: Statements contained in this announcement, regarding the prospects of the Group, have
not been reviewed or audited by the Group's external auditors
Date: 22/10/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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