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Unaudited Interim Results For The Six Months Ended 31 August 2012
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 2012
Revenue
- up 91,7% to R400,7 million
Operating profit
- up 147,3% to R42,5 million
Headline earnings per share
- up 85,7% to 31,63 cents
Net asset value per share
- up 17% to 217,35 cents
Project pipeline
- maintained in excess of R8 billion
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Six Month Six Months
31 August 31 August
R'000 2012 2011
Revenue 400 669 208 987
Cost of sales (332 379) (173 911)
Gross profit 68 290 35 076
Net administrative expenses (25 771) (17 887)
Operating profit 42 519 17 189
Net finance (cost)/income (1 581) 386
Share of profit of 12 434 9 390
Joint ventures(Net of tax)
Profit before taxation 53 372 26 965
Taxation (13 176) (5 315)
Profit after taxation 40 196 21 650
Total comprehensive income 40 196 21 650
Profit Attributable to:
Equity holders of the company 40 196 21 650
Earnings per share cents 31.63 17.03
Headline earnings per share cents 31.63 17.03
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
31 August 29 Feb
R'000 2012 2012
ASSETS
Non-current assets
Property, plant and equipment 5 161 3 878
Deferred tax 13 221 12 889
Other non-current assets 116 048 99 333
134 430 116 100
Current assets
Inventories 265 603 249 306
Construction contracts and work in progress 68 939 87 514
Trade and other receivables 30 813 15 827
Other current assets 35 899 23 446
Cash and cash equivalents 152 997 103 691
554 251 479 784
Total assets 688 681 595 884
EQUITY AND LIABILITIES
Equity
Capital and reserves 276 251 236 054
Total equity 276 251 236 054
Non-current liabilities
Deferred income tax liability 18 601 19 315
Other non-current liabilities - 245
18 601 19 560
Current liabilities
Current borrowings 268 768 225 111
Other current liabilities 125 061 115 159
393 829 340 270
Total liabilities 412 430 359 830
Total equity and liabilities 688 681 595 884
Net asset value per share cents 217.35 185.72
EARNINGS RECONCILIATION
Unaudited Unaudited
Six Month Six Months
31 August 31 August
R'000 2012 2011
Determination of headline earnings
Attributable profit 40 196 21 650
Headline earnings 40 196 21 650
Determination of diluted earnings
Attributable profit 40 196 21 650
Diluted earnings 40 196 21 650
Number of ordinary shares (000) 127 100 127 100
Weighted average shares (000) 127 100 127 100
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Audited Unaudited
Six Months Twelve months Six Months
31 August 28 February 31 August
R'000 2012 2012 2011
Net cash from operating activities 26 207 39 276 8 639
Net cash from investing activities (20 678) (16 243) (1 079)
Net cash from financing activities 43 777 69 745 2 383
Net increase in cash and cash
Equivalents 49 306 92 778 9 943
Cash and cash equivalents
at the beginning of the year 103 691 10 913 10 913
Cash and cash equivalents
at the end of the period 152 997 103 691 20 856
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained Total
Capital premium income equity
(Figures in Rands)
Balance at 1 March 2011
1 271 96 020 450 74 652 237 170 673 958
Profit for the period
- - 21 649 354 21 649 354
Total comprehensive income for
period ended 31 August 2011
- - 21 649 354 21 649 354
Balance at 31 August 2011
1 271 96 020 450 96 301 591 192 323 312
Balance at 1 March 2012
1 271 96 020 450 140 032 285 236 054 006
Profit for the period
- - 40 196 876 40 196 876
Total comprehensive income for
period end 31 August 2012
40 196 876 40 196 876
Balance at 31 August 2012
1 271 96 020 450 180 229 161 276 250 882
CONDENSED SEGMENT REPORT FOR THE GROUP
R'000 Land Professional Inter Group Total
Figures in rands Construction Development Services Holding
Aug 2012
Revenue - External 312 801 84 196 3 672 - 400 669
Operating profit/(loss) 39 267 27 3 441 (216) 42 519
Finance cost (4 184) - - - (4 184)
Adjusted profit/(loss)
before tax from reportable
segments 35 083 27 3 441 (216) 38 335
Aug 2011
Revenue - External 204 791 1 899 2 297 - 208 987
Operating profit/(loss) 15 670 (2 032) 2 077 1 474 17 189
Finance cost (323) - - - (323)
Adjusted profit/(loss)
before tax from reportable
segments 15 347 (2 032) 2 077 - 16 866
August 2012
Assets
Goodwill 28 515 - 4 155 - 32 670
Inventories 23 199 242 404 - - 265 603
Construction contracts 66 884 - - - 66 884
Liabilities
Borrowings (191 000) (77 768) - - (268 768)
February 2012
Assets
Goodwill 28 515 - 4 155 - 32 670
Inventories 22 130 227 175 - - 249 305
Construction contracts 85 459 - - - 85 459
Liabilities
Borrowings (147 221) (77 890) - - (225 111)
A reconciliation of adjusted profit/(loss) before tax is provided as follows:
31 Aug 2012 31 Aug 2011
Adjusted profit before tax for reportable segments 38 335 16 866
Share of profit of joint ventures Net of tax 12 435 9 390
Total Segments 50 770 26 256
Finance income net 2 602 709
Profit before tax 53 372 26 965
COMMENTARY
The Directors present the condensed consolidated interim financial results for the six months ended 31 August 2012 (the period), which reflect a substantial improvement in a number of key financial indicators.
Calgro, notwithstanding the challenging economic and trading conditions in both the construction and property development sectors, continued to grow in capacity and revenue and which resulted in an improved financial position. A strong project pipeline in excess of R8 billion, supported by healthy relationships with clients, financiers and suppliers again enabled the Group to deliver top and bottom line growth.
FINANCIAL RESULTS
Group revenue increased by 91,7% to R401 million (Aug 2011: R209 million) and headline earnings rose 85,6% to R40,2 million (Aug 2011: R21,7 million). Various projects from the Groups healthy R8 billion pipeline, each with their own risk profile and client profile are being implemented concurrently, with another project expected to commence during the second half of the 2013 financial year.
Margins for the period increased from 15,4% for the year ended 29 February 2012 to 17% for the six months ended 31 August 2012 due to a healthy combination of services installation and top structure construction of GAP, Affordable, Social and Rental units. Detailed budgets are consistently monitored and controlled to ensure that growth is controlled and contained to a manageable level.
Growth in overheads, most of which were on a variable cost basis, were well contained to 44,1% resulting in the growth of operating profit of 147,3%.
Profit from JVs increased by 32,4% resulting in a HEPS increase of 85,67%
Cash on hand grew to R153 million (Feb 2012: R104 million).
The Group continues to monitor net debt levels (Interest bearing debt minus cash on hand). Debt is set to increase over the next five years in proportion to revenue and working capital requirements. For the current reporting period net finance cost has increased to R 1,6 million as a result of additional debt raised towards the end of the February 2012 reporting period to support the Groups working capital requirement and to partially de-risk the balance sheet against late payments by clients.
The statement of financial position (balance sheet) is structured for future growth, with fair working capital on hand in the form of cash, available overdrafts and facilities. Debt repayment terms are aligned with the business cycle.
A new R56 million 48 month unsecured instrument, which bears interest at fixed rate of 12,050% and expires on 28 March 2016, was issued in the period under review.
SHARE APPRECIATION RIGHTS SCHEME (SAR)
Calgro issued a cash settled Share Appreciation Rights Scheme (SAR) of 8 million shares to directors and selected key employees. The grant date for the SAR was 1 March 2012. The shares vest after 2,3 and 4 years if a hurdle growth rate, linked to the Consumer Price Index (CPI), is exceeded. The amount recognised as an expense in the Statement of Comprehensive Income for the period to 31 August 2012 was R3 300 438.
OPERATIONAL REVIEW
New projects ensured that the pipeline of in excess of R8 billion was maintained.
Governments commitment to increased investment in infrastructure allowed the Group to deliver on infrastructure for integrated developments. At the same time, the Groups risk was again managed by accelerating the privately financed component of its integrated developments.
The Groups exposure to Social Housing was once again increased. Units aimed at the FLISP (Finance Linked Individual Subsidy Programme) market are currently under construction and will be brought to market as a pilot project.
In line with Group strategy all construction is currently still run in-house to ensure that the highest level of quality is maintained. The Group could, however, look to external contractors to implement the five year pipeline should internal capacity be fully utilised.
Construction of additional social housing (232 units) in the first phase of the Fleurhof project, have commenced. Infrastructure for the second phase of the project (Ext 5, 7 11) is on track and construction of units aimed at social housing (168 units), BNG (368 units) and the GAP market (135 units) will commence during the next 6 months. Infrastructure for the third phase will commence towards the end of the year to ensure continuity.
The installation of infrastructure for the first phases of both the Jabulani CBD and Jabulani Hostel projects has been completed. Construction of the first 500 units in the Hostel re-development project was completed. Once work relating to a variation order from Gautengs Department of Housing is completed, units will be handed over to beneficiaries. Construction of 1211 units in the CBD project has commenced with the first 255 units handed over and transferred to new owners in the period under review.
The recovery of the Affordable Housing sector continued during the period under review. Infrastructure for the next phase of the Jukskei View project was completed and all 272 available units were sold. Construction of the 281 units in the first phase is nearing completion. Momentum will be maintained by commencing construction on the newly serviced 272 stands in the next phase. With the project nearing completion, a new project aimed at this specific market segment was acquired and the installation of infrastructure for the Witpoortjie project will commence during the next reporting period.
264 Units in the first phase of the Brandwag project in Bloemfontein was completed and construction activity was increased with the commencement of the balance of the units in phase 1 (138 units). Construction on the second phase of 495 units commenced during May 2012.
The Elsiesrivier project (90 units) was completed with valuable lessons learnt in terms of construction in the Western Cape. These lessons could prove to be invaluable during construction on the Scottsdene project. Infrastructure for this project is on schedule and contributed towards revenue during the period under review. Construction of top-structures (CRU 350, BNG 550) commenced during August and will start contributing towards revenue during the next period.
The expected improvement in the Mid-to-High income housing sector has not materialised, therefore the units under construction in this sector did not significantly contribute to Group results. The installation of infrastructure for the La Vie Nouvelle project (retirement village) commenced and the project will be launched in 2013 once show units have been completed. All income generated on this project will be utilised to de-gear land acquired for this segment of the market. Development rights are in place on all other properties in this market segment. The Group will therefore continue to landbank these properties, whilst attempting to control and reduce exposure to financial institutions.
HEALTH & SAFETY
The Group has maintained its exceptional safety record and was again fatality and serious injuries free in the workplace. This position in which the Company finds itself is not taken for granted and a renewed effort was implemented to maintain this record reflecting the Groups commitment to sustaining its target level of zero harm.
PROSPECTS
Governments undertaking to close the gap between fully subsidized housing and the entry level affordable bonded market by providing Social Housing and the newly revised FLISP units is creating exciting new opportunities and the Group is positioned to make use of opportunities presented.
All contracts for the Belhar project were signed and concluded and the commencement of the project will significantly increase operations in the Western Cape.
Any reference to future performance included in this announcement has not been reviewed by the Groups external auditors.
CORPORATE GOVERNANCE
The directors and senior management of the Group endorse the Code of Governance Principles and Report on Governance, together referred to as King III. Having regard to the size of the Group, the board is of the opinion that the Group substantially complies with King III and with the Listings Requirements of the JSE Limited. The Group performs regular reviews of its corporate governance policies and practices and strives for continuous improvement in this regard.
APPRECIATION
Our management team have been instrumental in enabling the Group to continue its turnaround as promised. This contribution also enabled the Group to win the award in the category best company on the Alt-X before migrating to the main board. We thank them and look forward to continuing on this successful path of creating value for our shareholders. We would also like thank our partners, clients and shareholders for maintaining confidence in us.
Notes
1. Basis of preparation
These consolidated abridged interim financial statements have been prepared in terms of IAS 34 Interim Financial Reporting and comply with section 8.57 of the JSE Listings Requirements and the Companies Act of South Africa. The accounting policies are consistent with those used in the annual financial statements for the year ended 29 February 2012 and for unaudited results for the six months ended 31 August 2012 in terms of IFRS and AC 500.
2. Independent audit
These consolidated condensed interim financial statements have not been reviewed.
3. Dividends
No dividends have been declared for the period. The Board is of the opinion that the Group must continue to conserve cash to maintain the present growth and create shareholder value.
BP Malherbe (Chief executive officer) WJ Lategan (Financial director)
Johannesburg 11 October 2012
Directors:
PF Radebe (Chairperson) *, BP Malherbe (Chief executive officer), WJ Lategan (Financial director), FJ Steyn, DN Steyn, JB Gibbon*#, H Ntene*, R Patmore*# ,ME Gama*#)
(*Non-executive)
(#Independent)
Registered office: Cedarwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston 2196. (Private Bag X33, Craighall 2024)
Transfer secretaries: Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Sponsor: Grindrod Bank Limited
Auditors: PricewaterhouseCoopers Inc.
www.calgrom3.com
Date: 11/10/2012 01:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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