Drives focus on high-quality lifestyle, secure developments, and dignified memorial parks
Highlights:
- Both Earnings Per Share (“EPS”) and Headline Earning Per Share (“HEPS”) increased to 101.40 cents per share (August 2023: 78.88 cents per share)
- 869 residential units handed over
- 1 539 residential units under construction of which the majority will be handed over before the end of the year
- 4 201 additional opportunities ready for development
- Net Asset Value (“NAV”) increased by 6.92% to R14.29 per share (February 2024: R13.37 per share)
- Cash increased by 37.73% to R168.9 million (February 2024: R122.6 million)
- Loan to value at 30.40%
- Retained level 1 B-BBEE accreditation
Johannesburg, 14 October 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 solid interim results for the period ended 31 August 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 29.69% due to unit mix as well as historic land and infrastructure costs (normal range 20% to 25%).
Wikus Lategan, the CEO of Calgro M3, said that strategic capital allocation, a core element of the operational philosophy, remained a priority, with significant investments made to ensure that the pipeline supports sustainability and puts a formidable platform for growth in place. The Residential Property Development pipeline exceeding 38 000 opportunities, and that of Memorial Parks is a healthy 120 000 graves.
“Our continued focus on creating affordable, high-quality homes and dignified final resting places while adapting to market fluctuations demonstrates our unwavering commitment to the housing and memorial park markets in South Africa.”
Operational overview
The Residential Property Development segment, which remains the largest revenue source accounting for 94% (August 2023: 97%), operates in Gauteng and the Western Cape, with nine active projects. Lategan explained that revenue for the segment decreased for the period under review, driven by reduced unit sales due to pressure on already constrained consumers, and delayed transfers given the current high interest rate and depressed economic cycle. He added that the Group banked over R200 million in cash during the first two weeks of September.
During the period, 869 units were handed over, while 1 539 units are under construction, with the majority expected to be completed by the end of February 2025. The intention is to start on another 1 592 units during the next six months, targeted for completion in the next financial year. The Group also has a further approximately 5 000 serviced and being serviced opportunities available.
Lategan explains that to service the lower, high-demand end of the unhoused market, Calgro M3’s national average sales price for a core two-bedroom family apartment during the period was R636 617 (excluding VAT).
The Bankenveld District City (“Bankenveld”) land was transferred to the Calgro M3 and Eris Property Group (“Eris”) joint venture in September 2024. This is a strategic milestone, and bulk and link infrastructure construction will commence in the first quarter of 2025. The first phase of the infrastructure spend totals R250 million, 60% of which will be funded by Calgro M3.
Lategan said that the Group has also invested R138 million in infrastructure across key projects, including Fleurhof, Jabulani, and Belhar during the period. Jointly, these projects have just over R100 million in bulk and link infrastructure costs remaining to unlock the balance of the units to be developed.
“Additionally, substantial funds were allocated to the South Hills joint venture for infrastructure installation and construction of open market units and to the new Bankenveld development. These investments position us to capture future growth and generate positive cash flows.”
“The acquisition of additional land in Fleurhof reinforces our long-term strategy of focusing on a select number of key projects. These are areas where significant long-term bulk and link infrastructure investments have already been made.”
In the Memorial Parks segment, Lategan explained that revenue grew by 59.05% to R31.7 million, accounting for 6% of Group revenue. “The main goal for this segment remains cash generation for the Group that was up 52.79% to R 52.1 million and which covers 100% of Group overheads.
This segment’s resilience amid economic pressures highlights the enduring demand for dignified, well- maintained burial spaces, with a strategic focus entrenched in lay-by sales expansion and an enlarged presence across South Africa.
Financial review
In an economic environment that remains challenging, Calgro M3 is proud to present another set of resilient results for the first half of 2024. While Group revenue decreased from R689 million to R507 million, revenue generated within joint ventures increased from R23 million to R175 million. The Group gross profit margin increased to 29.69% with Residential Property Development at 27.86% and Memorial Parks at 57.79%. This, together with an increase in the share of profits from joint ventures, cost containment, and share buybacks, gave rise to a 28.55% increase in HEPS.
The Group’s financial position remains robust, with a current ratio (liquidity ratio) of 2.03 (February 2024: 2.06), demonstrating its healthy financial standing. Positive cash generation from operations during the period was driven by the successful transfer of open market units, the cash flow costs for which were already accounted for in the previous financial year. This was partially offset by the Group’s strategic investment in infrastructure on current projects, positioning Calgro M3 for future growth ahead of the commencement of the Bankenveld development.
Cash and cash equivalents increased by 37.73% to R168.9 million (February 2024: R122.6 million), reflecting the strength of liquidity management.
“We continued to make meaningful investments in infrastructure, with construction contract values increasing by 8.80% to R1.47 billion (February 2024: R1.35 billion), primarily due to the accelerated pace of development in Fleurhof and Belhar as well as within Jabulani, Scottsdene and La Vie Nouvelle as part of trading this project out over the next 24 to 30 months. The increase also contributed to the uplift in gross profit margins.
“Additionally, we have a strong pipeline of completed but not-as-yet transferred units, which we expect to sell and transfer within the next six months of the financial year. Group borrowings increased to R1.04 billion (February 2024: R934.8 million), primarily due to the strategic drawdown of the remaining R100 million from the ABSA facility. This action was taken in preparation for the Bankenveld land transfer, which occurred in September 2024.”
The Board announced the introduction of the inaugural dividend policy in the financial year ending 29 February 2024. The policy provides for dividends to be paid annually, calculated at a minimum of 5% of the HEPS. No dividends were declared during the current interim reporting period.
Outlook
Moving into the second half of 2024, Calgro M3 will continue its growth path. “Our robust pipeline, consisting of strategic large-scale developments Fleurhof, South Hills, Bankenveld and Belhar, combined with the trading out of other developments, positions us to deliver a future pipeline in excess of 38 000 units. These projects do not only represent financial returns, but they also represent our continued commitment to addressing South Africa’s housing needs and the offering of value-for-money homes that transform lives and communities.”
“Lategan emphasised that the focus in the coming months is to accelerate unit transfers, boost sales for sustainable growth to roll out the 15-year pipeline and optimise cash flow. Additionally, the Group will refine operational efficiencies across all segments to enhance profitability and value for shareholders and stakeholders.”
“The Memorial Parks segment, showing strong growth, is a key expansion focus. ‘We aim to expand our dignified burial solutions to new provinces, meeting demand while enhancing cash generation and providing lasting value with our flexible offerings.'”
He mentioned that their expertise in balancing infrastructure costs to deliver affordable, quality homes and memorial parks is a unique strength. Lategan concluded by saying that the mantra of “Building legacies, Changing lives” remains at the core of all of Calgro M3’s operations, underpinned by always considering if decisions contribute to #sustainableactions.
