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CGR
CGR
CGR - Calgro M3 - Audited abridged results for the year ended 28 February 2010
and notice of annual general meeting
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")
AUDITED ABRIDGED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010 AND NOTICE OF
ANNUAL GENERAL MEETING
CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
Audited Audited
Year Year
Ended ended
28 Feb 29 Feb
R`000 2010 2009
Revenue 188 726 233 054
Cost of sales (161 058) (182 205)
Gross profit 27 667 50 849
Other income 1 784 17 508
Other expenses (13 065) (23 705)
Net administrative expenses (28 488) (36 260)
Profit on sale of investment 29 304 -
Operating profit 17 203 8 392
Net finance cost (1 003) (506)
Profit before taxation 16 200 7 886
Taxation (712) (1 864)
Profit after taxation 15 488 6 022
Attributable to:
Equity holders of the company 15 488 6 022
Minority interest - -
Earnings per share - cents 12.19 4.74
Headline earnings per share - cents (7.64) 16.32
Fully diluted earnings per share - cents 12.19 3.80
CONDENSED CONSOLIDATED FINANCIAL POSITION STATEMENT
Audited Audited
Year Year
Ended ended
28 Feb 29 Feb
R`000 2010 2009
ASSETS
Non-current assets
Property, plant and equipment 7 150 8 100
Other non-current assets 55 799 49 433
62 949 57 533
Current assets
Inventories 266 393 260 115
Construction contracts 32 217 64 389
Trade and other receivables 14 428 18 368
Other current assets 15 502 13 836
Cash and cash equivalents 6 059 30 594
334 599 387 302
Assets of disposal group clasified as
held for sale - 126 301
334 599 513 603
Total assets 397 548 571 136
EQUITY AND LIABILITIES
Equity
Capital and reserves 153 719 138 231
153 719 138 231
Minority interest in equity - -
Total equity 153 719 138 231
Non-current liabilities
Non-current borrowings 154 379 117 957
Other non-current liabilities 6 704 19 266
161 083 137 223
Current liabilities
Current borrowings 9 650 69 350
Other current liabilities 55 834 104 094
Bank overdraft 17 262 15 842
82 746 189 286
Liabilities of disposal group classified
as held for sale - 106 396
Total liabilities 243 829 432 906
Total equity and liabilities 397 548 571 136
Net asset value per share - cents 120.9 108.8
EARNINGS RECONCILIATION
Audited Audited
Year Year
Ended ended
28 Feb 29 Feb
R`000 2010 2009
Determination of headline earnings
Attributable profit 15 488 6 022
Profit on disposal of subsidiary (net of tax) (25 202) -
Impairment of goodwill - 14 714
Headline earnings (9 714) 20 736
Determination of diluted earnings
Attributable profit 15 488 6 022
Share option expense - (963)
Diluted earnings 15 488 5 059
Number of ordinary shares (`000) 127 100 127 100
Weighted average shares (`000) 127 100 127 100
Fully diluted weighted average shares 127 100 133 208
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
Year Year
Ended ended
28 Feb 29 Feb
R`000 2010 2009
Net cash from operating activities 959 68 240
Net cash from investing activities (4 128) (30 666)
Net cash from financing activities (22 785) (20 626)
Net (decrease)/increase in cash and cash
equivalents and bank overdraft (25 954) 16 948
Cash and cash equivalents and bank
overdraft at the beginning of the year 14 751 (2 197)
Cash and cash equivalents and bank
overdraft at the end of the year (11 203) 14 751
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reserves for
own shares/
Share Share share purchase Retained Minority Total
Capital premium reserve income interest equity
(Figures in Rands)
Balance at 1 March 2008
1 271 96 020 450 963 141 36 186 235 - 133 171 097
Profit for the period
- - - 6 022 452 - 6 022 452
Share appreciation scheme
- - (963 141) - - (963 141)
Balance at 28 February 2009
1 271 96 020 450 - 42 208 687 - 138 230 408
Profit for the period
- - - 15 488 109 - 15 488 109
Balance at 28 February 2010
1 271 96 020 450 - 57 696 796 - 153 718 517
CONDENSED SEGMENT REPORT FOR THE GROUP
R`000 Land Professional
Figures in rands Construction Development Services Total
Feb 2010
Segment revenue 173 080 13 764 3 984 190 828
Inter-segment revenue - - (2 103) (2 103)
Revenue from external
Customers 173 380 13 764 1 881 188 725
Profit on sale of
Investment - 29 305 - 29 305
Operating (loss)/profit (346) (12 146) 1 324 (11 168)
Finance cost (4 052) (26) - (4 078)
Assets
Inventories 18 491 247 902 - 266 393
Prepayments 246 7 176 - 7 422
Construction contracts 32 217 - - 32 217
Liabilities
Borrowings (53 638) (110 392) - (164 030)
Feb 2009
Segment revenue 223 963 8 810 4 824 237 597
Inter-segment revenue - - (4 543) (4 543)
Revenue from external
Customers 223 963 8 810 281 233 054
Profit on sale of
Investment - - - -
Operating (loss)/profit 12 852 (3 402) (136) (9 314)
Finance cost (1 152) 498 - (654)
Assets
Inventories 22 870 237 245 - 260 115
Prepayments 1 054 5 026 - 6 080
Construction contracts 64 389 - - 64 389
Liabilities
Borrowings (66 351) (150 956) - (217 307)
Notes
1. Basis of preparation
These consolidated condensed financial statements are prepared in accordance
with International Financial Reporting Standards (IFRS) on Interim Financial
Reporting (IAS34), Schedule 4 of the South African Companies Act and the
Listings Requirements of the JSE Limited. The accounting policies are consistent
with those used in the annual financial statements for the year ended 28
February 2009. These consolidated condensed financial statements must be read in
conjunction with the audited annual financial statements. A copy of the audited
annual financial statements will be posted to shareholders on or about 24 May
2010.
2. Independent audit
These consolidated condensed financial statements have been audited by our
auditors PricewaterhouseCoopers Inc., who have performed the audit in accordance
with the International Standards on Auditing. A copy of the unqualified audit
report is available for inspection at the registered office of the company.
3. Dividends
No dividends have been declared for the financial year.
4. Profit on sale of investment
Profit on the sale of investment relates to the SENS announcement released on 13
March 2009, where shareholders were advised that Calgro M3 Land, a 100% held
subsidiary, had entered into a sale of shares agreement, in which Calgro M3 Land
disposed of a 30% equity interest in Fleurhof, to South African Housing Fund for
a total cash consideration of R30 million. A further amount of R50 million was
advanced in the form of a shareholders` loan.
5. Contingent asset/ Post balance sheet event
A subsidiary company has submitted a VAT claim to the South African Revenue
Services (SARS) involving an amount of R25,8 million which arose from an
alternative interpretation obtained by management concerning the possible zero
rating of certain income received.
No decision on this matter had been received from SARS at year end and this
amount has been accounted for as a contingent asset.
Subsequent to the year end the matter has been resolved with the South African
Revenue Services ("SARS") and the amount of R25.8 million will be treated as
income in the 2011 year as a non adjusting post balance sheet event as the
uncertainty was only resolved in 2011 with the decision by SARS.
COMMENTARY
INTRODUCTION
The directors present the audited condensed consolidated financial results for
the year ended 28 February 2010 ("the year"), which highlight the difficult
economic and trading conditions and the consequent delays experienced in major
housing projects, which impacted negatively on the Group`s top and bottom line.
The year nonetheless, saw Calgro M3 achieve a number of significant operational
milestones reflecting the group`s resilience and sustainability even in an
economic down cycle. These included:
* nearing completion on the successful Pennyville project while setting new
standards in entry level affordable rental housing delivery;
* breaking ground on civil infrastructure for Phase I (approximately 1 800
units) of the Fleurhof project;
* successfully launching the Fleurhof and Jabulani projects into the entry
level Affordable Housing market and converting sales into bonds;
* re-focusing on private sector housing projects in light of cash flow and
funding constraints at local and provincial government levels; and
* adding value to land acquired for the Mid-to-High income Housing segment to
be ready for project implementation once the housing market recovers.
FINANCIAL RESULTS
The processes to secure finance on long-term projects were far more arduous
during the year under review, which delayed construction on the Fleurhof,
Jabulani and Jukskei View projects and consequently resulted in a 18,88% decline
in group revenue to R189 million.
Finance for these projects has been successfully secured post year-end and the
projects are now proceeding as planned. However, revenue will remain under
pressure during the six months ahead, primarily as a result of the lead time
required to complete infrastructure before construction on top structures can
commence during July 2010. Total revenue over the next five years arising from
these three projects is estimated to be in the region of R2 billion.
The group generated a small operating profit (excluding fair value adjustments,
impairments and non-operational gains) for the year of R3.35 million (February
2009: operating profit R10.2 million), which essentially reflects a `break-even`
position for the group`s operations, and is regarded by management as a
reasonable outcome in the current tough economic climate. Earnings per share of
12.19 cents was up from 4.47 cents in the previous year. A headline loss per
share of 7.64 cents was incurred compared to headline earnings per share in the
previous year of 16.32 cents.
Gross profit margins decreased by 7.16% year-on-year, mainly due to the group
having to complete the construction of the Pennyville project in-house, as the
agreement with the sub-contractor on the project was terminated as a result of
poor quality and non performance.
Cash generated by operations decreased to R2.5 million from R68.5 million for
the previous year in line with the decrease in revenue. The material decrease in
trade and other payables further contributed to the decrease.
Cash on hand at year-end reduced to negative (R11.2) million from R14.8 million
as a result of a focused effort to reduce short- and long-term liabilities.
Interest-bearing liabilities were reduced to R163.8 million from R217.3 million.
Total goodwill amounted to R32.7 million which was the same as in the previous
year. No major capital expenditure was incurred.
OPERATIONAL REVIEW
The setback arising as a result of delays in receiving government funding for
the Fleurhof project necessitated a restructuring of the project to accelerate
the private sector component of the development ahead of the government-
subsidised housing portion. Once the initial delays were resolved, the group was
able to successfully launch both this and the Jabulani sectional title project
in 2010. The launch of these two projects has contributed greatly to improved
risk mitigation by exposing the group to a wider cross-spectrum of the housing
market.
Calgro M3 entered into sale agreements for over 400 full-title units at Fleurhof
in the first two months of 2010, and 80 sectional title units on the launch
weekend of Jabulani in February 2010, reflecting the improving confidence in the
affordable housing market. Subsequent to year-end, bond approvals have been
obtained for the majority of these units and the relevant revenue arising from
these sales will be accounted for in terms of the percentage of completion
method in the 2011 year. All indications are that the calculated risk of
installing services on the Fleurhof project during 2009 will realise benefits
for the group in the second half of the year ahead.
The group`s mid-to-high income housing operations contributed positively towards
group earnings notwithstanding the write-down of land-banked stock in the
balance sheet of R13.064 million (surplus land was necessarily impaired to
current net realisable value although pockets having been earmarked for future
sale), which was further compounded by the added pressure of generating sales in
a depressed market.
The group successfully contained overhead expenses through strict cost control
while still retaining skilled project managers and construction-related staff in
anticipation of future integrated housing projects.
HEALTH & SAFETY
Calgro M3 maintained its exceptional record of safety and was again not only
fatality free, but also free of any serious injuries in the workplace. This
reflects the group`s commitment to sustaining its target level of zero harm.
BOARD OF DIRECTORS
Effective 13 December 2009 D N Steyn was appointed to the board as an executive
director in the role of chief operating officer and BP Malherbe was officially
appointed as chief executive officer (a capacity in which he had been acting
since January 2009).
PROSPECTS
Notwithstanding the cash flow and funding constraints experienced at government
levels during the year, the integrated housing market holds promising prospects.
The non-delivery of housing in 2009 has further compounded the backlog in the
country to a deficit of roughly 2.1 million homes, escalating annually. With new
commitments recently announced by the Minister of Housing of R34.2 billion over
the next two years, and an additional R1 billion committed by the President
specifically for GAP Housing, prospects for integrated housing look buoyant.
The group will continue to target the Gauteng province. Expansion into other
regions in South Africa will be considered once Gauteng operations become
settled in servicing the recovering market.
Calgro M3`s Pennyville development has set new industry standards in integrated
housing and taught the group valuable lessons through which the Fleurhof and
Jabulani projects have been substantially improved.
The initial success of the Fleurhof and Jabulani projects (see `Operational
review`above) bodes well for future growth in the affordable housing segment of
the market. This is further supported by factors including the decreasing impact
of the National Credit Act and the increasing ability to secure end-user finance
on behalf of prospective home-owners.
ANNUAL REPORT
The annual report containing notice of the annual general meeting will be posted
to shareholders on or about 24 May 2010.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders will be
held at 10h00 on Wednesday, 23 June 2010 at the boardroom, Calgro M3, Cedarwood
House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, to transact
businessas stated in the notice of the annual general meeting posted to
shareholders as detailed above
APPRECIATION
We express our deep appreciation to our fellow directors, staff and stakeholders
for their continued support during this tough trading period. We believe we
have weathered the worst of the storm, and whilst challenges remain ahead, the
group is well-positioned to take advantage of recovering market segments to
boost growth.
BP Malherbe WJ Lategan
(Chief executive officer) (Financial Director)
Johannesburg 17 May 2010
Directors:
PF Radebe (Chairperson) *, BP Malherbe (Chief executive officer), WJ Lategan
(Financial Director), FJ Steyn, DN Steyn, JB Gibbon*#, H Ntene*, N Maninjwa*#, M
Phetla-Lekhethe*#.
(*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)
Designated advisor: Grindrod Bank Limited
Auditors: PricewaterhouseCoopers Inc.
www.calgrom3.com
Date: 17/05/2010 07:05:04 Produced by the JSE SENS Department.
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