Thursday, 20 October 2016 14:29

Calgro M3 upbeat as revenue up

Written by
Rate this item
(0 votes)

Calgro M3, which develops affordable housing with the government, sees group revenue rise 25.7% to R720m in the interim period to August.

 Wikus_Lategan_Calgro_M3

Calgro M3, which develops affordable housing with the government, saw group revenue rise 25.7% to R720m in the interim period to August.

The group acknowledged a big jump in operating profit of 82.5% for the period to R114m was due to its Fleurhof property development now being accounted for as a subsidiary of the company, and not being equity accounted as previously.

In the meanwhile, combined revenue — including from joint ventures and associates — fell 9.9% to R923m in the six months, mainly due to a slowdown in government infrastructure investment in the lead up to recent municipal elections. The group said community unrest at various projects, the worst being at South Hills, in the south of Johannesburg, saw that project brought to a standstill.

“I think it has been a challenging period,” Wikus Lategan, MD of Calgro M3, said on Monday.

“It is no secret that the government’s budget has been under pressure for some time now,” Lategan said.

He said the results were “satisfactory given the unpredictable economic environment”, and that bottom-line growth would be restored in the second half.

Lategan will take over as CEO from Ben Pierre Malherbe, who will become a nonexecutive director of the company from March 1 2017.

In anticipation of a slowdown in infrastructure spend by the state, Calgro M3 had increased its focus on the private sector.

“The group’s strategy is to diversify within residential market sectors,” he said. “Effectively, we want to be able to move more easily between sectors.”

He said the government had not stopped spending, but was focusing more on “how and where” it would spend in light of the poor economy and a possible sovereign ratings downgrade.

Alpha Wealth fund manager Keith McLachlan said on Monday the results were a “little bit below expectation”, and were largely driven by a lack of infrastructure spend. “Even though it was tough times, earnings are down 2% — which is relatively benign,” he said. This saw profit after tax of R82.7m, slightly down from R84.2m in the period in 2015.

Lategan said Calgro M3’s net debt-equity ratio of 0.53 from 0.59 in February 2016 “was comfortable” and provided an opportunity to increase gearing.

Accounting the Fleurhof project as a subsidiary resulted in a jump in revenue, cost of sales and gross profit, and a fall in share of profits from joint ventures and associates.

It also affected the group tax rate as the share of profits from joint ventures and associates were accounted for net of tax.

Calgro M3 said the construction of units sold to the private sector commenced only towards the end of the reporting period and would start contributing to profit in the next six months.

It said that cash outflows associated with the R93m payment of the final instalment of the Fleurhof purchase price and a net settlement in borrowings of R13m during the period were supported by positive cash generated from operations.

This was further supported by much lower than usual capital investment in long-term projects due to the “consolidation” by management of operations ahead of the municipal elections.

source: Business Day

Last modified on Thursday, 20 October 2016 14:42

Most Popular

Introducing cutting edge tech to the property industry

Feb 28, 2017
Virtual Reality Technology
Positioning ourselves at the cutting edge, Fieldspace Property Group is transforming the…

Calling all Cape Town owners and managers of commercial buildings and operations: Let’s talk energy and water

Mar 04, 2017
CoCT Energy Efficiency Forum
Join us for the Energy Efficiency Forum on 16 March at 8:30 for 9:00 until 12:30 followed…

The Polofields development launch met with great excitement

Feb 27, 2017
The Polofields apartment block
Balwin, South Africa’s largest homebuilder focusing on large scale sectional-title…

REBOSA opposes racist property advertisement in the strongest terms

Mar 02, 2017
Jan le Roux REBOSA
The real estate industry has been placed under an uncomfortable spotlight yet again with…

Making green affordable housing a reality

Mar 07, 2017
Belhar Gardens
Nedbank Corporate and Investment Banking (NCIB) today announced that is has made the…