The uncertain economic environment will not deter integrated housing developer Calgro M3 in its efforts to expand its project pipeline.

On Monday Calgro released impressive interim profit numbers with headline earnings per share increasing 30% to 66.5c for the six months to end August. Revenue rose 39% to R573m.

More critically, the company reported a more than R19bn project pipeline with a dozen active projects “in the ground” that were set to start generating revenue during the 2017 financial year. The company said these active projects would generate cash and profits that would improve the debt gearing ability and help fund the current and future project pipeline.

While no new projects were added to the pipeline in the interim period, CEO Ben Malherbe noted Calgro was investigating opportunities in the residential market outside the core public sector. The company was well positioned to capitalise on numerous opportunities, he said.

Although Calgro has played its cards conservatively over the past few years, Alpha Wealth portfolio manager Keith McLachlan believes it would start adding significantly to the pipeline in the years ahead.

Reassuringly Calgro generated R84m in operational cash flow. Calgro executives reiterated that cash flow management remained one of the biggest challenges in rolling out multiple projects. Around R52m of the R84m cash flow was reinvested in new projects. Mr Malherbe stressed management would keep a watchful eye on cash flow requirements during the initial project phases to ensure cash returns were maximised.

Calgro sets a minimum return on equity target of 30% over the medium to long term.

Net debt decreased by R30m to R331m as the company entered a more cash positive cycle in its projects.

Mr McLachlan commended Calgro’s executives on their efforts to derisk projects.

“There are clearly short-term challenges, but the projects are there and the delivery is there. The growth numbers look sustainable, barring any macro-economic setbacks.”

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