Calgro M3 lifts earnings 109% as restructuring pays off
CAPE TOWN - Calgro M3 Group lifted headline earnings a share 108.7 percent to 1.77 cents in the year to February 29 and restructuring over two years had put the housing and memorial parks group on a solid footing to face uncertainties around Covid-19, chief executive Wikus Lategen said on Monday.
The current cash burn rate had been reduced to about R14 million per month for fixed overheads and interest. Cash resources were in excess of R100m and its full overdraft of an additional R100m remains available, he said in a telephone interview.
The share price fell sharply by 51.88 percent yesterday to R3.85, this after the price had risen by much the same percentage last week following a trading statement that indicated that the group was turning around its operations.
Lategan said good progress had been made to turn the business around, with net cash generated from operating activities increasing by 69.9 percent. This enabled the group to settle R52.7m in financing activities, while still being able to increase cash balances by 108 percent to R255.1m.
He said changes to the residential property development business model were made, following a third successive year of challenges. The unit is the largest contributor to Calgro M3’s operations.
The start of the financial year was marked by land invasions, the lack of availability of electricity at the flagship Fleurhof development and a faltering economy.
“These challenges led to a decision to preserve liquidity through the suspension of operations on various sites, the implementation of cost cutting measures, a reassessment of internal structures and implementation strategies, and the restructuring of transactions,” said Lategan.
This included closure of the in-house construction division over 6-18 months through a staggered approach, with plans for affected employees to be absorbed by the goup’s newly-appointed external contractors,
Lategan added that with a pipeline of 36 686 opportunities, of which 7 326 were fully serviced, and 2 393 – including units where construction was previously suspended – under construction in various stages across seven projects, the group was well positioned with enough working capital to recommence sales and continue with construction.
He said the group remained bullish on market share growth opportunities in the Memorial Parks business and its ability to match the profitability of the property development business in the medium- to long-term.
The current areas of focus, to achieve this, were establishing a national footprint and enhancing sales distribution through various channels.
Group revenue fell by 1.3 percent to R984.1m in the year. Net asset value increased to 636.12 cents from 629.41 cents in 2019.
In residential rental operations, the focus was to dispose of all existing rental units and to utilise proceeds to settle debt and have cash available to invest in out of the ordinary opportunities that may become available. Discussions were underway to sell units in the Ruimsig and Scottsdene developments as a bulk transaction.
Once the disposals were complete, Calgro M3 woulds no longer have a residential rental property portfolio. However, once liquidity returned to a satisfactory level, the residential rental property portfolio would be re-established.