Johannesburg - The financial performance of AltX-listed affordable housing developer Calgro M3 Holdings improved in the six months to August but its margins remained under pressure because of continuing labour unrest in the Western Cape, delays in obtaining electricity supply to its Jabulani project and lower-margin services installations.
Calgro M3 delivered headline earnings a share of 40.16c in the six months to August, a 27 percent rise from a year earlier, the company reported yesterday.
Ben Pierre Malherbe, Calgro M3’s chief executive, said the gains were achieved despite the tough trading environment in the country’s development and construction sectors.
Operating profit declined by 21 percent to R33.7 million as the gross profit margin deteriorated to 14.26 percent from 17.04 percent. Revenue advanced 8 percent to R434.6m.
Malherbe attributed this to the increased activity in the installation of civil and electrical infrastructure with a lower margin, which preceded top structure construction scheduled for the next 18 months, when the margin and related cost from operations would increase again.
The group’s pipeline was kept at more than R10 billion.
An interim dividend was not declared, with the board believing that the group must continue to conserve cash to fund the present growth and create shareholder value.
Malherbe said the group had experienced a renewed commitment from the government to increase investment in infrastructure, allowing it to deliver on infrastructure for integrated developments.
He said the group benefited from its exposure to social housing and units aimed at the finance-linked individual subsidy programme (Flisp) market and with the Flisp pilot project successfully completed, more units were under construction on both the Fleurhof and Jabulani projects.
But uncertainties about the timing of the power supply to the Jabulani central business district projects resulted in construction activity declining substantially, putting margins under pressure, he said.
Malherbe said that trading conditions in the construction and development sector remained challenging but support from local government and strong end-user sales in the Flisp, gap and affordable markets were all contributing to making integrated developments based on public-private partnerships successful.
He said the government’s undertaking to close the gap between fully subsidised housing and the entry-level affordable bonded market by providing social housing and the newly revised Flisp units was continuing to create exciting opportunities and the group was well positioned to make use of opportunities presented.
Calgro M3 shares fell 1.39 percent to R6.40 on AltX yesterday. - Business Report