Group reports strong results and adds significant growth assets
Highlights:
- Earnings per share (“EPS”) increased to 192.01 cents per share (February 2023: 153.37 cents per share)
- Headline earnings per share (“HEPS”) increased to 189.87 cents per share (February 2023: 153.18 cents per share)
- Gross profit margin increased to 27.25%
- Net debt to equity level stable at 0.63 from 0.62 (2023)
- Share buyback of 25.91 million shares (18.5 %) at an average price of R2.92 per share and to the amount of R73.02 million
- Maiden dividend of 9.49350 cents per share declared
- Highest ever net asset value (“NAV”) per share, increasing by 40.60% to R 13.37 (2023: R 9.51) valued at the lowest of cost or net realisable value
- 1 794 units handed over in the current year
- 1 748 units currently under construction, with 1 100 planned to start on a staggered basis
- Retained level 1 B-BBEE accreditation
Johannesburg, 13 May 2024 – JSE-listed Calgro M3, the property and property-related investment company specialising in the development of Integrated Residential Housing Developments and the development and management of Memorial Parks, today announced robust final results for the period ended 29 February 2024. This comes as the Group continues to embrace its role as the architect of lifestyle, security, and high-specification offerings that have become the standard in both its residential developments and memorial parks, with the Group yielding an above-average gross profit margin of 27.25% (normal range 20% to 25%).
Wikus Lategan, the CEO of Calgro M3, said that the Group takes pride in reporting robust results this year, with a record-breaking performance that includes earnings per share of 192.01 cents, headline earnings per share of 189.87 cents, and net asset value growth of 40.60% per share. This stand-out performance was driven primarily by strategic initiatives and focused and effective capital deployment, which includes share repurchases.
“These achievements in a challenging market underscore our deep understanding of the Living Standards Measure (“LSM”) markets we serve, the prioritisation of long-term sustainability, and expanding market share while rolling out existing pipeline opportunities in a controlled but flexible manner. At the same time, we managed to navigate the complex terrain of property development and memorial parks management.”
Lategan added that this approach has been instrumental in supporting and optimising the Group’s robust future development pipeline of 23 370 opportunities, equating to approximately R16.4 billion of future revenue un-escalated. “This excludes our new Bankenveld District City project, which adds a minimum of R18 billion to the revenue pipeline through the delivery of between 20 000 and 30 0000 opportunities over a 15 to 20-year period.”
He indicated that the Memorial Parks business offers over 120 000 burial opportunities (approximate revenue of R2.6 billion). “We have implemented strategic efforts to enhance open market sales and generated consistent cash flows, getting us ever closer to the goal of covering Group overheads and interest expense from the Memorial Parks cash flows.”
The Group also acquired a new memorial park in Rustenburg, adding approximately 25 533 burial opportunities to the pipeline. This additional memorial park was acquired but not yet transferred at the end of the financial year.
Operational overview
The Residential Property Development segment, which remains the largest revenue source (96%), operates in Gauteng and the Western Cape, with nine active projects.
Lategan explained that while revenue across the Group’s projects had decreased in the 2024 financial year the overall segment gross profit improved to R330.63 million or 26.62% – a noteworthy increase from the previous year’s 23.15%. “We also made commendable progress in increasing other income, achieving a 28% increase due to higher bond commissions, supporting the focus on open-market housing. These gains reflect our commitment to revenue diversification, ensuring stable customer handovers and consistent cash flow.”
During the year under review, 1 794 opportunities were handed over, with 1 748 opportunities currently under construction and nearing completion for hand-over and related revenue recognition. Included within the serviced opportunities are 1 100 opportunities, with construction commencing in the first six months of the 2025 financial year. More than 2 970 opportunities are currently being serviced.
“Despite the tough market, major banks continue to support the industry, recognising the need for housing and its role in job creation and societal wellbeing. Additionally, we increased our pipeline of existing projects by 2 182 opportunities, driven by an additional 804 opportunities arising from the Group acquiring strategic land next to our Belhar project, with the remaining increase stemming from more efficient designs to improve our product offering.”
Lategan said that R314.58 million was invested in infrastructure at the Jabulani, Fleurhof, South Hills, and Belhar projects during the year, impacting the net cash from operations but creating long-term value from a capital allocation perspective.
In the Memorial Parks segment, he explained that the 2024 financial year presented significant growth. “This growth is reflected not only in the 50.94% increase in gross profit but also in the significant increase of 40.7% in cash receipts, the highest since we started this segment in 2017.”
Lategan added that the industry, inherently linked to the uncertainties of life, demands not only business acumen but also a profound sense of empathy and responsibility. “In this spirit, we have navigated the complexities of the market and the evolving needs of our customers, ensuring that growth aligns with our commitment to service excellence. The active lay-by book amounts to R36.4 million, reflecting consumer confidence and the successful implementation and positioning of our flexible payment options.” He said that the revenue recognition policy on these lay-bys remains conservative, ensuring the Group maintains financial integrity by recognising sales only on the successful collection of the full purchase price.
The national footprint has been strategically extended to six parks, the latest of which is expected to open in Rustenburg in the third quarter of 2024.
Financial review
In this financial year, the Group’s profit after tax reached R196.80 million, increasing from the previous year’s R186.29 million. The improved performance was due to an increase of 3.80% in gross profit margin, coupled with a 4.18% reduction in administrative expenses. Despite these gains, total revenue fell by 15.79% to R1 284.54 million (2023: R1525.32 million). The increased focus on open-market sales, combined with delays in unit transfers and challenging economic conditions, played a part in the decrease in revenue.
The Group has achieved a record gross profit margin of 27.25% (2023: 23.45%). This notable increase can be attributed to diligent cost control strategies and effective project management within both reportable segments. Additionally, the mix of units sold this year, predominantly in the open market, played a crucial role. These factors collectively pushed the gross profit margin beyond the Group’s anticipated range of 20% to 25%. “While this performance is exceptional, we maintain that the 20% to 25% target range remains a suitable benchmark for assessing the Group’s financial health,” said Lategan.
EPS increased to 192.01 cents (2023: 153.37 cents), while HEPS climbed to 189.87 cents (2023: 153.18 cents). This growth underscores the astute strategic capital allocation by the Group, which included the repurchase of 25.91 million shares at an average price of R2.92 per share. This share buyback has resulted in an immediate accretive value on both EPS and HEPS, highlighting the judicious approach to capital management. The full effect of this action on both EPS and HEPS is anticipated to be even more significant in the 2025 financial statements, due to the influence of the weighted average number of shares in the current financial year calculation.
Cash and cash equivalents at the end of the year decreased to R122.64 million (2023: R172.61 million), with the decrease largely being attributed to cash invested in near-completed units, which are expected to be handed over, and the revenue accounted for, in the next six months. Additional liquidity in the form of a R100 million undrawn overdraft facility, and a R100 million undrawn facility from another local South African debt provider, will enable the Group to execute on short to medium-term goals.
The balance sheet remains robust, characterised by stable liabilities and a net debt-to-equity ratio holding steady at 0.63 compared to 0.62 the previous year. The Group’s liquidity position is strong, supported by undrawn overdraft and borrowing facilities.
On Monday, May 13, 2024, the board declared a maiden cash dividend of 9.49350 cents per share (2023: nil cents per share), in respect of the year ended 29 February 2024. The net cash dividend payable to shareholders subject to dividend tax is 7.59480 cents per share (2022: nil cents per share). The total dividend for the year amounts to 9.4350 cents per share (2022: nil cents per share).
Outlook
Lategan said that Calgro M3 has established a foundation of consistent and successful project delivery, bolstered by a robust pipeline that has underpinned the Group’s record of generating positive outcomes in both profit and cash flow. “Our well-established performance track record illustrates the Calgro M3 family’s capability of adeptly navigating risks and achieving goals to the benefit of all our stakeholders.”
Calgro M3’s journey going forward is characterised by positive cash flows expected from revenue and profitability growth. With sustainable debt levels now effectively managed and the expertise of seasoned management teams in both businesses, the Group is well-equipped to overcome any hurdles.
“Our potential new product offering targeting lower LSM groups for affordable housing and memorial services intends to capture the current market demand. This, coupled with diverse revenue streams across various market segments in both businesses, positions us to make the most of the considerable housing deficit and robust memorial services sector demand,” Lategan explained.
He concluded by saying that this multifaceted approach not only hedges risk but also ensures consistent financial stability, empowering us to seize diverse market opportunities and adapt to changes in the economic landscape.
“Innovation and technological advancement are at the heart of our strategy to ensure that Calgro M3 remains a leader in efficiency and profitability, irrespective of difficult market conditions, as illustrated by the current financial year results.”
