Wrap Text
Summarised audited consolidated financial results
for the year ended 28 February 2018
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")
Summarised audited consolidated financial results
for the year ended 28 February 2018
Highlights
- Core headline earnings increased by 6.97% to 143.47 cents per share ("cps")
- Headline earnings decreased by 32.28% to 90.12 cps
- Combined revenue increased by 16.71% to R2.3 billion
- First international funding of R387 million (Euro 25 million) secured
- Level 1 B-BBEE contributor
- First 648 units completed and handed over to the Afhco Calgro M3 Consortium (Pty) Ltd (REIT JV)
- Memorial Parks contributed 5.14% of Group profit after tax
- Property Development and Memorial Parks Project pipeline of R27.5 billion
Commentary
Nature of business
Calgro M3 is a property and property-related investment company that is a market leader in the
development of Integrated Residential Developments, Residential Rental Investments as well as
the development and management of Memorial Parks.
Introduction
Our performance over the past year was lower than our internal expectation due to weak economic
conditions, market volatility and cash flow constraints. The latter resulting primarily from
delays in securing working and investment capital to support and enable our increased focus on
the private sector in our Residential Property Development business and acquisitions for the
Memorial Parks and Real Estate Investment businesses.
New reporting metrics
The Group's financial performance was impacted by the construction of units for the REIT JV, in
which Calgro M3 has a 49% shareholding. This shareholding resulted in 49% of the development
profit (construction and other services) being eliminated on consolidation as an unrealised
profit, as prescribed by International Financial Reporting Standards ("IFRS"). This unrealised
profit is carried on the balance sheet until realised in future financial years, once the units
are completed, tenanted and the portfolio is revalued.
The impact of this unrealised profit on the financial performance and necessitated the institution
of new metrics to measure operational performance between reporting periods. This further provides
an indication of performance which is then consistent between periods. The three pertinent metrics
are described as:
- Core earnings per share ("Core EPS") - Earnings per share before elimination of unrealised
profits from development of units for the REIT JV;
- Core headline earnings per share ("Core HEPS") - Headline earnings per share before elimination
of unrealised profits from development of units for the REIT JV; and
- Core operating profit - Operating profit before elimination of unrealised profits from
development of units for the REIT JV.
We believe current core earnings and revenue growth, despite these challenges, are testament to
the effectiveness and resilience of our strategy and proves that the variable operating model is
efficient in uncertain times, as recently experienced during the financial year. Management of
operational risks in each of the three businesses will continue to be a key focus for the
management teams while at the same time investigating and executing on new opportunities to
achieve the medium-term goal of equal profit contribution from each segment. We will, however,
focus on maximising cash flows before investing in new opportunities.
As a Group we remain committed to methodically execute our overall strategy of shareholder
wealth creation in the medium to long term and not on short-term gains and profit, while relying
on the support and commitment of all our stakeholders - from Government and regulators to the
individual communities in which we operate.
Operational review
Nasrec Memorial Park won the "Landscape Construction" and the "Landscape and Turf Maintenance"
Water-Wise Awards at the 2017 South African Landscapers Institute Awards. The Group will continue
to develop and implement water-saving initiatives throughout the project cycle.
Witpoortjie project won the Gauteng Govan Mbeki award for Best Affordable Project.
Integrated Residential Developments
During the year, 8 564 units and houses were under construction, of which 3 426 were completed
and handed over to customers. Within the balance of 5 138, just over half are expected to be
handed over before the end of July 2018. The Group has approximately 3 500 units already sold on
which construction will commence as early in the 2019 financial year as possible. The total
Residential Property Development pipeline consists of 54 376 opportunities with an unescalated
revenue of R25.3 billion.
2 426 opportunities are currently being serviced that will bring the total number of serviced
opportunities to in excess of 9 000. The Group is planning to commence infrastructure installation
on an approximate 3 000 opportunities during the calendar year.
Current serviced opportunities available for development
Fleurhof 2 365
South Hills 1 465
Jabulani 645
La Vie Nouvelle 103
Scottsdene 317
Belhar 2 387
Subsequent to the financial year-end, the Group experienced attempted land grabs at both the
Fleurhof and Scottsdene projects, with some units being illegally occupied by the community and
properties vandalised. The Group acted swiftly and secured both sites using private security.
The Group is in the process of quantifying the damages suffered and has been engaging with its
insurance companies to recover the losses suffered. In addition, the Group continues to engage
and consult with local and provincial government to offer our assistance in searching for a
sustainable and legal way to eradicate the housing shortage in an endeavour to ensure that all
people can live in safe and dignified homes.
In the year under review South Hills was the largest contributor to revenue, surpassing Fleurhof
as our flagship project. The Belhar and Scottsdene projects in Cape Town contributed 19.38% of
revenue even through the slowdown due to the water crisis. Construction at our first project in
KwaZulu-Natal will start during the first quarter of the new financial year, while commencement
on the long-awaited Kwa Nobuhle project in the Eastern Cape is planned for later in the year.
The Group made a decision to discontinue the Leratong and Nelmapius projects due to a change in
the risk profiles of these projects. Leratong was removed from the Group's pipeline towards the
end of the 2018 financial year and Nelmapius was never included in the pipeline. The Group will
reassess its position in this regard should the risk profile change.
In line with our risk mitigation strategy, the Group disposed of its 35% shareholding in the
Otjomuise project in Namibia for R6 million when its risk profile also changed. Originally a
project management/consulting project with limited human and financial capital exposure and
limited development risk, the project evolved into a complete development project with a far
larger capital requirement and increased risk profile. In response to the risk assessments
performed, it was concluded that resources could be deployed more efficiently on our own projects
in South Africa and the decision was taken to dispose of our shareholding in the joint venture
for R6 million.
Calgro M3 remains well positioned to capitalise on the public sector's commitment to the mega and
catalytic projects initiative and remain ready to participate in these projects when roll out
commences. With an increasing number of units being developed, the Group is able to capitalise on
volume discounts and rebates together with enhanced negotiating power. The bulk of the increase in
margin is being passed onto the consumer in the form of an enhanced product offering for the same
sales price. Marketing remains a specific focus, with sales to the open market increasing by 16.7%
from the previous year.
The primary areas of focus for the Residential Property Development business in the coming year
will be to roll out the existing pipeline, capitalising on the private sector sales drive,
enhancing the product offering, while at the same time remaining focused on efficiencies.
Memorial Parks
The Memorial Parks business continued its improved contribution to Group profit and even though
small overall, growth prospects are exciting. A target of more than 10% contribution from Memorial
Parks is set for the coming financial year. This rather ambitious target is supported by grave
sales that are increasing month on month, coupled with ongoing improvements and advancements
within the business.
Total cash
Number received
Nasrec Memorial Park
- Graves sold 2018 financial year* 785 R9.0 million
- Graves sold in prior years 449 R4.8 million
Fourways Memorial Park
- Graves sold 2018 financial year* 130 R5.9 million
- Other products 32
- Graves sold in prior years (since acquisition) 48 R1.2 million
* Cash received from 232 graves at an average sales price of R16 594 (including VAT) have not been
accounted for yet due to being sold on deferred payment terms.
Our national roll-out plan is rapidly developing, supported through the acquisition of the
Durbanville Memorial Park in Cape Town on 1 March 2018 and the Avalon Memorial Park in
Bloemfontein, which will be effective 1 June 2018. The Eastern Cape and KwaZulu-Natal are targeted
provinces for expansion, planned for later in the 2019 financial year or early in the 2020
financial year.
Residential Rental Investments
Of the 3 852 units in the first tranche, 648 were completed and handed over to the Afhco Calgro M3
Consortium (the "Consortium") starting in November 2017. The remaining units will be handed over
in a staggered manner over the coming months, with Belhar delayed due to the slowdown associated
with the water challenges in Cape Town.
The Consortium is to target net property income yields in excess of 10.5% as well as a targeted
rental escalation of 6% per annum that equates to a circa 20% return on equity in total (after
gearing). No additional equity will be required by Calgro M3 for this initial investment, as the
investment will be funded from value locked up in the Group balance sheet.
In line with our medium to long-term strategy, this sector was entered, to secure annuity revenue
for use as operating cash. In addition to this, the Group benefits from bulk infrastructure
created previously, rather than having to create infrastructure each time a development
commences.
This strategy further assists Government in eradicating the housing backlog without exposing the
Group to diminishing public sector spend.
In line with the diversification strategy, we have entered into our first non-Calgro M3
acquisition in Ruimsig, Gauteng to the value of R402.4 million. A deposit of R78.6 million has
been paid.
Financial review
The reported financial results for the year are best defined by two specific items, unrealised
profit from the construction of units for the REIT JV as well as working capital requirements
and constraints. When analysing the financial results for the year, readers are urged to take
special note of the impact of these two items on the results and the inter-relatedness of
their effects.
Statement of Comprehensive Income
R'000 Movement % 2018 2017
Revenue 12.09 1 742 602 1 554 680
Reversal of unrealised profit adjustment 88 012 1 176
Adjusted revenue 17.66 1 830 614 1 555 856
Combined revenue 16.71 2 322 494 1 989 921
Reversal of unrealised profit adjustment 88 012 1 176
Adjusted combined revenue 21.06 2 410 506 1 991 097
Operating profit 149 926 228 965
Reversal of unrealised profit adjustment 88 012 1 176
Adjusted operating profit 3.39 237 938 230 141
Core earnings per share ("Core EPS") 9.81 147.26 134.10
Core headline earnings per share ("Core HEPS") 6.97 143.47 134.12
Return on equity 10.99% 18.36%
Return on equity (including unrealised profit) 16.76% 18.42%
Unrealised profit
Unrealised profit before tax 88 012 1 176
Income tax at 28% (24 643) (329)
Unrealised profit after tax 63 369 847
Unrealised profit - share of profit of joint
ventures and associates 4 999 475
Total post tax profit reversal 68 368 1 322
When comparing the full year results with the interim results for the period ended August 2017, a
slowdown in revenue and combined revenue in the second six months is evident. The slowdown was due
to a calculated decision by management to ensure the Group was not placed under undue working
capital pressure while additional working capital funding was being secured. The Group set out to
raise R550 million in May 2017 of which R350 million would be allocated to working capital and the
balance to new opportunities and as a cash buffer. The capital raising process took a lot longer
than initially anticipated and operations had to be slowed down to protect working capital.
Revenue and combined revenue therefore grew at a slower pace in the second half of the year.
In November 2017 the first tranche of international funding was raised to the value of
R278 million, from Societe De Promotion Et De Participation Pour La Cooperation Economique
("Proparco") S.A, a subsidiary of Agence Francaise De Developpement ("AFD"). The balance of
R109 million is due to be released in June/July 2018, once certain international environmental
and health and safety compliance requirements are achieved.
The Group is in the final stages of securing an additional R200 million facility from a local
funder which will complete the fundraising goal of R550 million. This funding, together with cash
flow upside from operations, will sustain the Group's capital requirements in the short term.
We are pleased with the diversity of the contribution to combined revenue, with South Hills
surpassing Fleurhof as the main contributor in the year under review. South Hills was responsible
for 41.94% (2017: 19.0%) and Fleurhof for a contribution of 22.86% (2017: 36.1%). This is viewed
as an extremely positive development that demonstrates the Group's ability to consistently and
sustainably deliver on these large-scale integrated projects.
Memorial Parks contributed 5.14% (2017: 0%) to overall Group profit. With a target of equal profit
contribution from all three businesses in the medium term, the Group views Memorial Parks as a
high-growth area. A substantial amount of emphasis will be placed on growing this business in the
next financial year to achieve our internal target of a contribution in excess of 10% of Group
profit.
Basic earnings per share ("EPS") decreased by 29.42% to 93.91 cps (2017: 133.06 cps). Similarly,
headline earnings per share ("HEPS") decreased by 32.28% to 90.12 cps (2017: 133.08 cps). The new
metrics which provide additional information on the Group's performance, core earnings per share
("Core EPS"), increased by 9.81% to 147.26 cps (2017: 134.10 cps), as well as core headline
earnings per share ("Core HEPS"), which increased by 6.97% to 143.47 cps (2017: 134.12 cps).
R'000 2018 2017
Gross profit % reconciliation
Gross profit 270 089 334 163
Reversal of unrealised profit adjustment 88 012 1 176
Adjusted gross profit 358 101 335 339
Gross profit (%) 15.50% 21.49%
Adjusted gross profit (%) 19.56% 21.55%
The gross profit margin of 15.50% is lower than the gross margin of 21.49% reported in
February 2017. Once unrealised profit is added back, the adjusted margin settles at 19.56%, which
more closely aligns to the target range of 20% to 25%. The adjusted margin is expected to increase
towards the target range once all rebates and volume discounts are secured from suppliers on the
back of higher volumes from construction of units for the REIT JV and the private sector. This is
already evidenced from the 17.14% gross profit margin reported in August 2017.
In the current year administrative expenses increased by 11.58% with the bulk of the increase
attributable to marketing-related expenses, technology expenses, corporate social investments,
staff increases and various professional consultants.
The increase in finance income is primarily attributable to increased operations at the South Hills
and Witpoortjie projects and an increase in shareholder loans to the Tanganani project, which are
all accounted for as joint ventures (JVs) within the Group. These increased operations resulted in
increased loan and debtor account balances on which finance income is earned. These increased
operations resulted in a 52.5% increase in the share of profits of joint ventures and associates
to R9.6 million (2017: R6.3 million).
Statement of Financial Position
R'000 Movement % 2018 2017
Working capital invested (inventory, construction
contracts, trade and other receivables) 18.32 2 669 111 2 255 835
Cash and cash equivalents (34.91) 156 723 240 765
Borrowings 55.62 889 597 571 646
Net debt to equity ratio* 0.75 0.42
Covenant (target below covenant) 1.5 1.5
Debt service cover ratio ("DSCR")* 1.57 1.83
Covenant (target above covenant) 1.2 N/A
Current ratio 1.75 1.79
* Please refer to note 3 for definition and calculation.
Construction contracts increased during the year, reflecting the increased construction and
development of units for the REIT JV, as well as for the private sector not yet handed over. The
construction contracts balance is estimated to be at its peak, for units for the REIT JV (to which
the bulk of the increase is attributable). Total construction contracts balance at year-end,
attributable to the construction of units for the REIT JV, is R392.3 million.
Construction of these units had a negative impact on cash generated from operations as all capital
is required to be invested until the units are completed. The units will be handed over on a
staggered basis over the next six months and this will free up working capital.
Even though net movements in inventory were minimal, they bear mentioning. Of the balance of
R554.4 million (2017: R596.0 million), R130.7 million (2017: R120.2 million) is attributable to
Memorial Parks. A further R116 million was transferred from inventory to construction contracts
during the year as construction began on Jabulani Parcel C and K units and R27.9 million was spent
on the La Vie Nouvelle frail-care building.
In addition, the Group secured new properties in Vredehoek in the Western Cape, and at Bridge City
and Umhlanga Hills in KwaZulu-Natal - all with a focus on the private sector and with bulk
infrastructure already in place. The properties were acquired on structured payment arrangements
with minimal upfront capital investment.
The acquisition of the Durbanville Memorial Park was completed after year-end, with Calgro M3
obtaining effective control from 1 March 2018 for an amount of R18 million (payable on a
structured basis). Included in the acquisition is a fully registered non-profit organisation
("NPO") worth in excess of R10 million which will be responsible for the Memorial Parks
maintenance fund of the Group going forward. Cash balances at year-end settled at R156.7 million
(2017: R240.8 million) and are expected to strengthen as more REIT JV and private sector units
are completed and handed over and as additional working capital is raised.
The net debt to equity ratio has increased to 0.75 (2017: 0.42). These gearing levels remain
comfortably within the covenant ratio of 1.5 and our own internal tolerance level of 1.2. The
gearing levels are expected to rise to a level closer to 1:1 as more working and investment
capital is secured to fund the increased focus on the private sector as well as the acquisition
of new opportunities. The Group's weighted average cost of debt is currently at 11.11%.
Cash flow
Cash flow from operations came under pressure during the year due to the increased construction
of REIT JV and private sector units. Cash generated from operations is expected to improve in the
next six months as more units are handed over. If the investment into the REIT JV is eliminated
in the current year, the cash flow from operations would have illustrated the following cash
generated from operations:
R'000 2018
Cash generated from operations (205 839)
Total investment into REIT JV units at year-end 392 260
Adjusted cash generated from operations excluding REIT JV units 186 421
At 28 February 2018, the estimated cash flow upside on completion of all the first
phase (3 852 units) REIT units, after the deduction of our equity contribution is
illustrated below:
R'000 2018
Total cost to complete units (338 665)
Total funds to be received on completion 1 162 334
Less: Deposit (177 027)
646 642
Less: Equity contribution to the REIT JV (384 451)
Total cash upside upon completion to be used for future working capital 262 191
During the year, the Group invested very little into new infrastructure in an effort not to place
additional pressure on working capital. With cash flow stabilising, the Group commenced with
infrastructure installation on 2 426 opportunities close to year-end and is expected to commence
on a further approximate 3 000 opportunities as the year progresses, to ensure future growth.
The first investment of R102.3 million into the Afhco Calgro M3 Consortium was made towards the
end of the current financial year with a further R384.5 million expected in the next six months
with no additional cash flow requirement.
Segmental report changes
The appointed Chief Operating Decision Maker ("CODM") within the Calgro M3 Group is the Group's
Executive Committee (Exco). It is Exco's responsibility to meet on a regular basis and determine
strategy for the Group, set and review budgets, allocate Group resources to the operating segments
and assess the performance of the operating segments.
The CODM manages the Group activities in three distinct segments, namely:
- Integrated Residential Developments - which consists of the following activities: infrastructure
development; marketing and sales; construction; and handover to client;
- Memorial Parks; and
- Residential Rental Investments.
As a result of the strategic redesign of the Group's business, the CODM has changed its assessment
of the performance and allocation of resources to align with the Group's current and strategic
goals.
The segmental representation has changed from the previously reported segments of: Residential
Property Developments, Memorial Parks, and Professional Services. As a result, the prior year
numbers have been restated to reflect the change.
Empowerment
Transformation goes beyond compliance with legislation and regulation. Our goal is to create a
truly transformed organisation where people are empowered to fulfil their purpose. We acknowledge
that the broader transformation of society cannot take place unless large companies like Calgro M3
play a major part. We are proud to announce that Calgro M3 is a recognised level 1 contributor
(2017: Level 4 contributor).
Strategy and prospects
Our strategy is to enable the extraction of multiple sources of revenue and profits from
businesses and opportunities along the turnkey property development value chain, which will result
in an improved operating margin blend and the creation of annuity income.
This strategy can only be achieved if the capital base grows annually by capitalising profits
rather than paying dividends and continuing to gear profits. The optimal application of capital
between new opportunities, working capital and risk capital will remain an important strategic
decision as capital allocation across this horizontal value chain is made.
Investment into opportunities that deliver annuity income is a strong element of strategic focus
for the Group. The medium-term goal is to:
- Increase exposure in the residential rental market;
- Develop insurance-related products for the Memorial Parks business by partnering with insurance
specialists; and
- Identify and invest in new business opportunities able to deliver annuity income.
Residential Property Development pipeline of R25.3 billion with a targeted ROE of 30%.
Memorial Parks pipeline increasing to R2.2 billion with a targeted ROE > 30%.
Real Estate Investment("REIT") with a targeted ROE of 20.5%(annual rental yield plus revaluation
growth) on an estimated Group equity investment of R4 billion.
Current share price levels are estimated to be at a discount to management valuation. Refer to
the integrated annual report for a detailed analysis of the management valuation and metrics
applied as well as the notice of AGM.
Health, safety and environmental initiatives
Calgro M3 remains committed to health and safety standards of the highest level as well as
minimising the negative impact of any operations on the environment.
The Group is currently on a renewed drive to enhance the policies and procedures that govern
health and safety across operations as well as the environmental impact. The development and
enforcement of these policies and procedures are being undertaken by a newly appointed Health
and Safety Manager and an Environmental Manager, together with support from external experts.
The Group is extremely proud to announce that 2018 was again fatality free.
Board of Directors
It was with great sadness that we announced the passing of Mr Hugh Cameron, an Independent
Non-Executive Board member and Chairperson of the Audit and Risk Committee on 6 April after a
short illness.
Hugh served on the Calgro M3 Board from 8 May 2015 and fulfilled his roles with enthusiasm,
dedication and distinction, making an immeasurable contribution to the Company. Our
condolences are extended to his wife, children, grandchildren, family and friends.
Calgro M3 has begun the process of identifying and nominating an appropriate replacement and
shareholders will be informed accordingly.
Strengthening of operational management
We continue to assess the quality of leadership and management to ensure that we have strong
leaders, able to think strategically and execute efficiently. We are pleased to report that
Manda Nkuhlu, who joined the Board as an Executive Director in 2017, is now operating as the
Managing Director for the Residential Property Development business and is assisted by
Deon Steyn, Derek Steyn, Urvash Kissoon Singh and Allistiar Langson.
Annual report and notice of annual general meeting
The Company's integrated annual report containing the audited annual financial statements for
the year ended 28 February 2018, and the notice of the annual general meeting are available
on the Company's website hosted at http://www.calgrom3.com. It will be posted to shareholders on or
about 28 May 2018.
Appreciation
None of our achievements would be possible without our clients. We continually strive to
assist clients to fulfil their needs and thank them for their continued support of the Calgro M3
brand and the spectrum of products and services. We further rely on support and commitment from
all our stakeholders and shareholders - from government and regulators to the individual
communities in which we operate.
We would also like to thank the management team for their commitment and drive, and to extend
our gratitude to the Calgro M3 Board and employees. Our team has an unchanged focus of achieving
a 30% return on equity and will continue to work to achieve this.
Our ultimate goal of becoming the provider of choice in all our markets is within our reach and
we once again renew our commitment to Build Legacies and Changing Lives.
Wikus Lategan Waldi Joubert
Chief Executive Officer Financial Director
Johannesburg
14 May 2018
Summarised Consolidated Statement of Comprehensive Income
Audited Audited
year ended year ended
28 February 28 February
R'000 2018 2017
Revenue 1 742 602 1 554 680
Cost of sales (1 472 513) (1 220 517)
Gross profit 270 089 334 163
Other income 12 922 16 600
Other expenses (1 310) (3 700)
Administrative expenses (131 775) (118 098)
Operating profit 149 926 228 965
Finance income 28 957 19 994
Finance cost (16 687) (21 919)
Share of profit of joint ventures and associates - net of tax 9 560 6 269
Profit before tax 171 756 233 309
Taxation (50 949) (63 176)
Profit after taxation 120 807 170 133
Profit after taxation and other comprehensive income
attributable to:
- Owners of the parent 120 351 169 156
- Non-controlling interests 456 977
120 807 170 133
Profit after taxation attributable to:
Equity holders of the company 120 351 169 156
Earnings per share - cents 93.91 133.06
Fully diluted earnings per share - cents 92.00 129.00
Earnings Reconciliation
Audited Audited
year ended year ended
28 February 28 February
R'000 2018 2017
Determination of headline and diluted earnings
Attributable profit 120 351 169 156
(Profit)/loss on disposal of property (170) 25
Gain on deemed disposal of interest in joint venture (6 000) -
Impairment of goodwill 1 310 -
Headline and diluted headline earnings 115 491 169 181
Determination of earnings and diluted earnings
Attributable profit 120 351 169 156
Earnings and diluted earnings 120 351 169 156
Number of ordinary shares ('000) 128 150 128 150
Weighted average shares ('000) 128 150 127 126
Headline earnings per share - cents 90.12 133.08
Fully diluted headline earnings per share - cents 88.29 129.02
Fully diluted weighted average shares ('000) 130 813 131 127
Summarised Consolidated Statement of Financial Position
Audited Audited
year ended year ended
28 February 28 February
R'000 2018 2017
ASSETS
Non-current assets
Investment Property 8 879 6 519
Property, plant and equipment 6 163 5 806
Intangible assets 159 664 159 690
Investment in joint ventures and associates 41 909 12 349
Deferred income tax asset 23 999 14 847
240 614 199 211
Current assets
Loans to joint ventures and associates 143 422 26 451
Inventories 554 397 595 990
Construction contracts and work in progress 1 820 974 1 387 537
Trade and other receivables 293 739 276 198
Current tax receivable 16 600 18 603
Cash and cash equivalents 156 723 240 765
2 985 855 2 545 544
Total assets 3 226 469 2 744 755
EQUITY AND LIABILITIES
Equity
Stated capital 116 256 116 256
Share-based payment reserve 74 056 60 847
Retained income 977 015 846 079
1 167 327 1 023 182
Non-controlling interests 355 (101)
Total equity 1 167 682 1 023 081
LIABILITIES
Non-current liabilities
Deferred income tax liability 354 283 302 358
354 283 302 358
Current liabilities
Borrowings 889 597 571 646
Other current liabilities 814 907 847 670
1 704 504 1 419 316
Total liabilities 2 058 787 1 721 674
Total equity and liabilities 3 226 469 2 744 755
Net asset value per share - cents 911.18 798.35
Net tangible asset value per share - cents 786.59 673.73
Summarised Consolidated Statement of Cash Flows
Audited Audited
year ended year ended
28 February 28 February
R'000 2018 2017
Cash (utilised in)/generated from operating activities
Cash (utilised in)/generated from operations (205 838) 292 068
Finance income received 6 686 16 727
Finance cost paid (75 747) (63 167)
Tax paid (1 478) (7 444)
Net cash (utilised in)/generated from operating activities (276 377) 238 184
Cash flows invested in investing activities
Purchase of investment property (2 360) -
Purchase of property plant and equipment (1 579) (867)
Purchase of intangible assets (7) (52)
Proceeds on disposals of property plant and equipment 243 -
Increase in Investments in JV/Associate (10 000) -
Acquisition of business (2 500) (4 500)
Acquisition of subsidiary 51 (93 000)
Loans advanced to joint ventures and associates (113 381) (18 472)
Net cash invested in investing activities (129 533) (116 891)
Cash flows from financing activities
Proceeds of borrowings 516 000 239 809
Repayment of borrowings (192 000) (206 915)
Equity (paid back)/received in advance* (2 132) 6 507
Net cash from financing activities 321 868 39 401
Net (decrease)/increase in cash and cash equivalents (84 042) 160 694
Cash and cash equivalents at the beginning of the year 240 765 80 071
Cash and cash equivalents at end of the year 156 723 240 765
* This relates to cash paid back and received for the subscription of shares issued under the
Calgro M3 Executive Share Scheme.
Summarised Consolidated Statement of Changes in Equity
Share-
based Non-
Stated payment Retained controlling Total
R'000 capital reserve income Total interests equity
Balance at 1 March 2016 96 022 47 922 676 923 820 867 (1 078) 819 789
Share-based payment/
reserve movement 20 234 12 925 - 33 159 - 33 159
Total comprehensive
income for the year ended
28 February 2017 - - 169 156 169 156 977 170 133
Balance at 1 March 2017 116 256 60 847 846 079 1 023 182 (101) 1 023 081
Share-based payment/
reserve movement - 23 794 - 23 794 - 23 794
Cancellation of executive
share scheme participant - (10 585) 10 585 - - -
Total comprehensive
income for the year ended
28 February 2018 - - 120 351 120 351 456 120 807
Balance at 28 February 2018 116 256 74 056 977 015 1 167 327 355 1 167 682
Summarised Segment Report for the Group
Residential Residential Holding
February 2018 Property Memorial Rental Company/
R'000 Development Parks Investment unallocated* Total
Total segment revenue 1 729 998 12 604 - - 1 742 602
Revenue from joint
ventures and associates 579 892 - - - 579 892
Combined revenue 2 309 890 12 604 - - 2 322 494
Operating profit 148 554 5 712 - (4 340) 149 926
Finance income 28 922 28 - 7 28 957
Finance costs (15 587) (1 100) - - (16 687)
Share of profit/(loss) of
associate/joint venture 9 052 - 508 - 9 560
Adjusted profit before tax 170 941 4 640 508 (4 333) 171 756
Profit after taxation 118 677 6 215 508 (4 593) 120 807
ASSETS
Non-current assets
Investment property - 8 879 - - 8 879
Property, plant and
equipment 3 608 2 555 - - 6 163
Intangible assets 158 969 695 - - 159 664
Investment in joint ventures
and associates 41 401 - 508 - 41 909
Deferred income tax asset 22 043 1 290 666 - 23 999
226 021 13 419 1 174 - 240 614
Current assets
Loans to joint ventures
and associates 41 092 - 120 330 - 143 422
Inventories 423 642 130 755 - - 554 397
Current tax receivable 16 484 32 - 84 16 600
Construction contracts 1 820 974 - - - 1 820 974
Trade and other
receivables 287 783 5 482 451 23 293 739
Cash and cash equivalents 152 898 2 825 - 1 000 156 723
2 742 873 139 094 102 781 1 107 2 985 855
Total assets 2 968 893 152 513 103 955 1 107 3 226 469
Residential Residential Holding
February 2018 Property Memorial Rental Company/
R'000 Development Parks Investment unallocated* Total
LIABILITIES
Non-current liabilities
Deferred income tax
liability 354 283 - - - 354 283
354 283 - - - 354 283
Current liabilities
Borrowings 271 426 - - 618 170 889 597
Loans from group
companies - - - - -
Current income tax
liabilities 23 - - - 23
Trade and other payables 787 199 25 947 - 1 738 814 884
1 058 648 25 947 - 619 908 1 704 504
Total liabilities 1 412 931 25 947 - 619 908 2 058 787
* The group operates a central treasury function across all business segments. The Bond exchange
borrowings cannot be allocated to specific segment and as such is included as unallocated due to
it being utilised across the segments. Funding raised from Proparco during the year was
specifically raised for the Residential property development segment and allocated as such.
Any items that are not allocatable to specific segments are indicated as Holding
Company/unallocated.
Residential Residential Holding
February 2017 Property Memorial Rental Company/
R'000 Development Parks Investment unallocated* Total
Segment revenue 1 550 363 4 317 - - 1 554 680
Revenue from joint
ventures and associates 435 241 - - - 435 241
Combined revenue 1 985 604 4 317 - - 1 989 921
Operating profit 230 593 1 210 - (2 838) 228 965
Finance income 19 977 10 - 8 19 995
Finance costs (21 263) (656) - - (21 919)
Share of profit/(loss) of
associate/joint venture 6 269 - - - 6 269
Adjusted profit before tax 235 576 564 - (2 830) 233 310
Profit after taxation 173 952 (241) - (3 578) 170 133
ASSETS
Non-current assets
Investment property - 6 519 - - 6 519
Property, plant and
equipment 3 401 2 405 - - 5 806
Intangible assets 158 995 695 - - 159 690
Investment in joint ventures
and associates 12 349 - - - 12 349
Deferred income tax asset 13 977 870 - - 14 847
188 722 10 489 - - 199 211
Current assets
Loans to joint ventures
and associates 26 451 - - - 26 451
Inventories 475 764 120 226 - - 595 990
Current tax receivable 18 443 - - 160 18 603
Construction contracts 1 383 647 - - - 1 383 647
Work in progress 3 890 - - - 3 890
Trade and other
receivables 275 841 138 - 219 276 198
Cash and cash equivalents 239 563 1 192 - 10 240 765
2 423 599 121 556 - 389 2 545 544
Total assets 2 612 321 132 045 - 389 2 744 755
LIABILITIES
Non-current liabilities
Deferred income tax
liability 302 358 - - - 302 358
302 358 - - - 302 358
Current liabilities
Borrowings - - - 571 646 571 646
Current income tax
liabilities 2 7 - - 9
Trade and other payables 823 514 23 044 - 1 103 847 661
823 516 23 051 - 572 749 1 419 316
Total liabilities 1 125 874 23 051 - 572 749 1 721 674
* The group operates a central treasury function across all business segments. The Bond exchange
borrowings cannot be allocated to a specific segment and as such is included as unallocated due
to it being utilised across the segments.
Any items that are not allocatable to specific segments are indicated as Holding
Company/unallocated.
Related party transactions
Audited Audited
year ended year ended
28 February 28 February
R'000 2018 2017
Compensation paid to key employees and personnel 34 409 60 894
Finance income from related parties 15 791 10 368
Contract revenue received from joint ventures 485 166 203 119
Services fees received from joint ventures - 10 843
Notes
1. Basis of preparation
The summarised consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for abridged reports and the
requirements of the Companies Act applicable to summary financial statements. The Listings
Requirements require abridged reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting
Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34: Interim
Financial Reporting. The accounting policies applied in the preparation of the consolidated
financial statements from which the summary consolidated financial statements were derived are
in terms of International Financial Reporting Standards and are consistent with those
accounting policies applied in the preparation of the previous consolidated annual financial
statements.
The consolidated financial statements were internally compiled by UK Kissoon Singh CA(SA) and
M Esterhuizen CA(SA) under the supervision of WA Joubert CA(SA) and were approved by the Board
on 11 May 2018.
This summarised report is extracted from audited information, but is not itself audited. The
consolidated annual financial statements were audited by PricewaterhouseCoopers Inc., who
expressed an unmodified opinion thereon. The audited consolidated annual financial statements
and the auditor's report thereon are available for inspection at the Company's registered
office. The directors take full responsibility for the preparation of the abridged report that
the financial information has been correctly extracted from the underlying annual financial
statements.
2. Dividends
Management believes that cash should be retained to fund growth within the Group. Cash
retention is important to ensure investment into future projects and businesses. The Board has
therefore resolved not to declare a dividend for this financial year.
3. Ratio calculations
Net debt/equity ratio
This ratio is calculated as net debt divided by equity. Net debt is calculated as total
interest bearing borrowings less cash and cash equivalents. Equity is calculated as the total
equity per the statement of financial position (excluding share-based payment reserve).
R'000 2018 2017
Net debt
Borrowings 889 597 571 646
Other Interest bearing borrowings 88 408 71 599
Less: Cash and cash equivalents (156 723) (240 765)
821 282 402 480
Equity
Stated capital 116 256 116 256
Retained income 977 015 846 079
1 093 271 962 335
Net debt/equity ratio 0.75 0.42
Proparco requirements
The Group monitors capital from Proparco on the basis of its Debt Service Cover Ratio and its
Net Debt/Equity Ratio (as above). The minimum allowed debt service cover ratio for the Group
is 1.2 and the net debt/equity ratio of below 1.5:1.
Debt Service Cover Ratio ("DSCR")
This ratio is calculated as available cash flow divided by debt service requirement. Available
cash flow is calculated as net cash generated from operating activities plus new financial
indebtedness incurred plus cash and cash equivalent at the beginning of the year plus capital
expenditure (including investments into associates and joint ventures). Debt service
requirement is calculated as Interest and fees plus Principal repayments.
R'000 2018 2017
Available cash flow
Net cash generated from operating activities (205 839) 292 068
New financial indebtedness incurred 516 000 239 809
Cash and cash equivalent BoY 240 765 80 071
Capital expenditure (129 532) (116 890)
421 394 495 058
Debt service requirement
Interests and fees (75 747) (63 167)
Principal repayments (192 000) (206 915)
(267 747) (270 082)
Debt Service Cover Ratio ("DSCR") 1.57 1.83
Directors
PF Radebe (Chairperson)*#
WJ Lategan (Chief Executive Officer)
FJ Steyn
WA Joubert (Financial Director)
W Williams
VJ Klein*#
H Ntene*#
RB Patmore*#
ME Gama*#
BP Malherbe*
Auditors
MN Nkuhlu
HC Cameron*# (passed away on 6 April 2018)
* Non-executive # Independent
Registered office
Calgro M3
Ballywoods Office Park
33 Ballyclare Drive
Bryanston
2196
Private Bag X33, Craighall, 2024
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers
15 Biermann Avenue
Rosebank
2196
PO Box 61051, Marshalltown, 2107
Sponsor
Grindrod Bank Limited
Auditors
PricewaterhouseCoopers Inc.
http://www.calgrom3.com
Disclaimer: Statements contained in this announcement regarding the prospects of the Group have not
been reviewed or audited by the Group's external auditors.
Date: 14/05/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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