| Thu 9 Oct 2008, 12:03 | | CGR - Calgro M3 Holdings Limited - Financial results for the 6 months ended 31 |
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CGR
CGR
CGR - Calgro M3 Holdings Limited - Financial results for the 6 months ended 31
August 2008
Calgro M3 Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/027663/06)
Share code: CGR ISIN: ZAE000109203
"Calgro M3" or "Calgro" or "the company"
FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 31 AUGUST 2008
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited Audited
Six months Six months Year Year
Ended ended ended ended
31 Aug 31 Aug 29 Feb 28 Feb
R`000 2008 2007 2008 2007
Revenue 116,889 91,417 316,677 124,169
Cost of sales (83,998) (78,970) (239,719) (104,578)
Gross profit 32,891 12,447 76,958 19,591
Net administrative
expenses (26,297) (11,928) (29,433) (12,848)
Gain on cancellation of
put option 17,035 - - -
Impairment of goodwill (8,828) - - -
Operating profit 14,801 519 47,525 6,743
Net finance cost (1,362) (190) (2,393) (176)
Profit before taxation 13,439 329 45,132 6,567
Taxation (1,914) (95) (13,723) (2,193)
Profit after taxation 11,525 234 31,409 4,374
Attributable to:
Equity holders of the
company 11,525 234 31,409 4,167
Minority interest - - - 207
Earnings per share - cents 9.07 0.25 30.33 4.48
Headline earnings per share
- cents 16.01 0.25 30.40 4.47
Fully diluted earnings
per share - cents 9.48 0.25 28.32 4.48
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited Audited
Six months Six months Year Year
Ended ended ended ended
31 Aug 31 Aug 29 Feb 28 Feb
R`000 2008 2007 2008 2007
ASSETS
Non-current assets
Property, plant and equipment 8,417 2,276 7,782 1,505
Other non-current assets 32,117 6,920 28,610 5,896
40,534 9,196 36,392 7,401
Current assets
Inventories 276,971 45,157 251,417 34,433
Construction contracts
and receivables 144,363 10,493 91,000 6,855
Trade and other receivables 19,063 3,786 54,684 12,093
Other current assets 59,930 9,620 43,027 6,700
Cash and cash equivalents 176 2,220 3,111 1,066
500,503 71,276 443,239 61,147
Total assets 541,037 80,472 479,631 68,548
EQUITY AND LIABILITIES
Equity
Capital and reserves 145,948 5,121 133,171 4,778
145,948 5,121 133,171 4,778
Minority interest in equity - - - 207
Total equity 145,948 5,121 133,171 4,985
Non-current liabilities
Non-current borrowings 190,141 458 165,268 519
Other non-current
liabilities 27,749 187 13,766 134
217,890 645 179,036 653
Current liabilities
Current borrowings 112,563 41,204 91,205 32,760
Other current
liabilities 46,731 31,779 70,912 28,570
Bank overdraft 17,905 1,723 5,308 1,580
Total liabilities 177,199 74,706 167,425 62,910
Total equity and
liabilities 541,037 80,472 479,631 68,548
Net asset value per share
- cents 114.8 5.5 104.8 5.4
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited Audited
Six months Six months Year Year
Ended ended ended ended
31 Aug 31 Aug 29 Feb 28 Feb
R`000 2008 2007 2008 2007
Net cash from operating
activities (71,530) (2,595) (289,327) (20,664)
Net cash from investing
activities 8,917 (4,776) (12,728) (8,552)
Net cash from financing
activities 47,081 8,382 300,372 30,599
Net (decrease)/increase in
cash and cash equivalents
and bank overdraft (15,532) 1,011 (1,683) 1,383
Cash and cash equivalents
and bank overdraft at the
beginning of the year (2,197) (514) (514) (1,897)
Cash and cash equivalents
and bank overdraft at the
end of the year (17,729) 497 (2,197) (514)
EARNINGS RECONCILIATION
Unaudited Unaudited Audited Audited
Six months Six months Year Year
ended ended ended ended
31 Aug 31 Aug 29 Feb 28 Feb
R`000 2008 2007 2008 2007
Determination of headline
earnings
Attributable profit 11,525 234 31,409 4,167
Impairment of goodwill 8,828 - - -
Loss/(profit) on disposal
of property, plant and
equipment - 72 (7)
Headline earnings 20,235 234 31,481 4,160
Determination of diluted earnings
Attributable profit 11,525 234 31,409 4,167
Share option expense 1,253 - 963 -
Diluted earnings 12,778 234 32,372 4,167
Number of ordinary shares 127,100 93,000 127,100 93,000
Weighted average shares 127,100 93,000 103,562 93,000
Fully diluted weighted
average shares 134,836 93,000 114,299 93,000
CONDENSED SEGMENT REPORT FOR THE GROUP
Integrated
R`000 Clusters housing Total
Aug 2008
Revenue 31,116 85,773 116,889
Operating (loss)/profit (330) 13,017 12,687 Total
assets 315,662 225,375 541,037
Total liabilities 220,900 174,188 395,088
Feb 2008
Revenue 72,629 244,048 316,677
Operating profit/(loss) 7,655 55,180 47,525
Total assets 234,292 245,339 479,631
Total liabilities 140,615 205,845 346,460
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reserves for own
shares/share
Share Share repurchase Retained Minority Total
(Rands) capital premium reserve income interest equity
Balance at
01 Mar 2007 930 4,776,791 206,926 4,984,647
Profit for the
year 31,409,443 31,409,443
Issue of shares 341 96,020,450 96,020,791
Share appreciation
scheme 963,141 963,141
Acquisition of
minority interest (206,926) (206,926)
Balance at
29 Feb 2008 1,271 96,020,450 963,141 36,186,234 - 133,171,096
Profit for the
period 11,525,000 11,525,000
Share appreciation
scheme 1,253,448 1,253,448
Balance at 31 Aug
2008 1,271 96,020,450 2,216,589 47,710,234 - 145,948,544
Notes
1. Basis of preparation
These consolidated condensed financial statements are prepared in accordance
with the Listings Requirements of the JSE Limited, the International Financial
Reporting Standards (IFRS) on Interim Financial Reporting (IAS34) and Schedule 4
of the South African Companies Act. The accounting policies are consistent with
those used in the annual financial statements for the year ended 29 February
2008.
2. Independent audit
These consolidated condensed financial statements have not been audited.
3. Dividends
No dividends have been declared for this interim period.
COMMENTS
NATURE OF BUSINESS
Calgro M3 is a mixed-use housing development company, established in 1995. Our
business model focuses on the acquisition of land, town planning and project
management of civil infrastructure, services installation, marketing and
construction of homes.
The market niche for the group housing products comprises of two specific market
segments viz.: Integrated housing and Mid to high income developments.
Integrated housing comprises three components:
1. RDP homes - costed at government subsidy scales currently R54,650 and
R22,418 for municipal engineering services;
2. "GAP" homes - valued between R180,000 and R400,000, falling within the
requirements of the financial services sector charter 2005); and
3. Affordable homes - valued between R400,000 and R600,000.
The company`s strategy supports government`s proactive drive as expressed in the
`Breaking New Ground` initiative aimed at ensuring the creation of sustainable
human settlements. This is achieved through the integration of various income
groups of buyers/beneficiaries as well as the provision of socio-amenities such
as schools and hospitals, within a fully integrated community development.
Mid to High income developments
These are homes valued between R600,000 and R1.6m.
FINANCIAL OVERVIEW
Group revenue for the half year ended August 2008 increased by 28% compared to
August 2007, although it decreased by 39% compared with the previous six months
to February 2008. Headline earnings increased from August 2007 compared to the
previous six months as a result of a Put and Call option gain released by the
group in the six months under review. The material increase in liabilities
compared with August 2007 is due to the fact that the entity was unlisted at
that time and now has a much greater asset and revenue base.
We have experienced unavoidable delays in construction, mainly due to
specification changes, necessitating contractual adjustments on the Pennyville
project. A considerable number of units on this project are "GAP" houses, of
which 40% of the costs are borne in the first 60% of the construction phase.
Within the last 40% of the allocated construction period, 60% (i.e. fixtures,
fittings and finishes) of costs will be borne. As construction of most of the
"GAP" units commenced in the six months under review and have all reached 60%
completion, with only 40% cost accumulated, the work in progress calculation is
skewed. The picture for the following six months therefore, will be different,
presenting an improvement in profit.
During this reporting period, the mid to high income developments segment was
still under pressure as a result of the shortage of electricity supply and the
slowdown in the high end of the residential market. Subsequent to our half year-
end, there has been an improvement on both fronts as electricity supply has been
secured on three projects and two have been registered. Sales have picked up
during the last month and we expect to see a definite improvement over the next
six months as we continue this trend.
The infrastructure of building capacity contributed to the material increase in
overheads in respect of the Fleurhof and Midrand projects which will start
breaking ground within the next six months. This will have a major effect on
profits going forward as all the infrastructure and feasibility studies were
completed in the six months under review, with no corresponding income.
Contingent liability
The company received a summons for R5.5m. After obtaining legal advice,
management is of the opinion the claim will not succeed.
"Green" initiative
Calgro M3 has commissioned on-going studies in the area of energy conservation
and the reduction of carbon emissions. Our policy is to support these
initiatives by promoting the use of natural resources with the installation of
electricity-saving devices.
These will have an enhanced appeal to the community in reducing electricity
expenses and we expect the benefits of these initiatives to be felt far into the
future.
Partnership agreement
A partnership agreement (Memorandum of Understanding) has been signed with the
City of Jo`burg in respect of the Fleurhof Project, whereby the council will
take up houses and provide infrastructure grants.
Achievements in the year under review
The company has achieved significant milestones in the six months under review:
1. Yield X listing. The company was the first to list a debt programme of
R300 million on the JSE Yield X on 25 August 2008 which was attended by the
Minister of Housing, Lindiwe Sisulu. This had not not yet been drawn down
by 31 August 2008;
2. The Fleurhof project which will accommodate 6,500 homes. Major milestones
have been reached on the Town Planning for the project and Calgro M3 is on
track to begin the installation of civil infrastructure by November 2008,
the actual construction of homes beginning in March 2009. The estimated
turnover from this project is R1.6bn.
3. The Midrand project which comprises 14,700 homes. Town planning for the
project is proceeding well and Calgro M3 is on track to obtain transfer
once subdivision is completed. The project is expected to commence in the
first quarter of the 2009 financial year. The expected turnover from the
project is R2.6bn.
4. The Pennyville Project. The first units in the project were officially
handed over to beneficiaries by the Mayor and MEC for Housing after a
ribbon-cutting ceremony on 2 October 2008.
PROSPECTS
Industry overview
With the shortage of housing in SA estimated to be at 2,1 million homes, coupled
with government`s commitment to discharging the constitutional obligation
contained in Section 26 of the constitution, i.e. to provide homes for all South
Africans, the prospects for the company are excellent. By leveraging off our
solid performance, Calgro M3 is well positioned to unlock the opportunity and
has in this regard formed a well-tested working relationship in a private-public
partnership with the state to support this end result.
Government has set aside R42bn for housing projects over the next four years and
aims to deliver 250,000 houses a year. This, together with government`s concept
of "breaking new ground" which focuses on integrated housing, supports Calgro
M3`s business model.
As part of the Financial Sector Charter, 2005, the major banks committed to the
provision of R65bn by 2011 for the GAP market, which further supports
government`s drive for the development of integrated housing. Integrated housing
is the model for the future and Calgro M3 has the proven ability to support this
outcome.
In the cluster market, Calgro M3 expects the macroeconomic environment to
continue to play a significant role. The impact will continue to be one of a
slowdown for the next year in sales and prices will soften.
In the affordable market, the continued housing shortage supports strong demand,
even in the prevailing macroeconomic environment. This market shows price
elasticity as individuals continue to purchase houses as they become available.
As interest rates rise, individuals purchase smaller houses relative to their
income and affordability in light of interest-rate movements.
Calgro M3 Delivery
With the delivery on the Pennyville project and the construction of the Fleurhof
and Midrand projects to commence within the next 12 months, a solid pipeline in
integrated housing for the next seven to ten years has been established. This,
coupled with the remedial actions in the cluster division to a strategic fit of
20% cluster and 80% integrated business model, will underpin the group`s ability
to deliver profits and sustainability of earnings growth. R100 million realised
in cash for work in progress after our half year-end will also contribute to the
restructuring of the balance sheet.
Management is confident that it has the capability and capacity to handle all
its chosen projects particularly through the now proven roll out of the
successful Pennyville model. Going forward management remains focused on growing
shareholder earnings through delivering of the group strategy highlighted above.
Johannesburg 8 October 2008
Directors:
PF Radebe (Chairperson) *, PM Waweru (Chief executive officer), WJ Lategan,
BP Malherbe, H Ntene*, FJ Steyn.
(*Non-executive)
Registered office: 112 - 11th Street, Parkmore, Sandton 2196
(Private Bag X33, Craighall 2024)
Transfer secretaries: Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown 2107)
Designated advisor: PSG Capital (Pty) Ltd
Auditors: PricewaterhouseCoopers Inc.
www.calgrom3.com
Date: 09/10/2008 12:03:05 Produced by the JSE SENS Department.
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