CAPE TOWN - Calgro M3, a leader in the development of integrated residential developments and memorial parks, returned to profitability in the year to February 28 after revenue, gross profit and the balance sheet improved.
Chief executive Wikus Lategan said it was a particularly pleasing set of results, given that the group had faced enormous challenges during the financial years 2016 to 2018, following which hard decisions were made and executed in 2019 and 2020.
“We’ve managed to reduce our debt and cut our fixed costs substantially by 40 percent, sell non-core projects and the residential rental portfolio, and ultimately improve liquidity,” he said.
Demand, driven by the low interest rate cycle, was also likely to remain firm in the short to medium term, he said in a telephone interview.
A swift reaction to the challenges of the Covid-19 pandemic also helped, with Calgro M3 currently having 4 654 residential opportunities under construction, compared to 2 393 last year. The memorial parks business continued to grow, albeit from a low base to a point where it was supporting the group with annuity income.
Total cash received in the memorial parks businesses reflected a compound annual growth rate of 53 percent from 2018 to 2021.
“We will continue driving balance sheet strength by reducing debt, but will retain sufficient facilities to support operations and ensure sufficient cash flow and liquidity during challenging times,” said Lategan.
He said their operating market continued to present a “huge opportunity” for the group, and his challenge was not to grow too fast and overextend the balance sheet in the current environment.
Ruimsig rental portfolio was disposed of during the year, as was the Vista Park share buyback, amounting to 4.6 percent of the issued share capital.
Debt was restructured, and only R70 million remained in capital market maturities in the next 24 months. The construction division was being outsourced.
Overall revenue for the year decreased by 10.7 percent to R879.1m, after being down 24 percent in August last year, when construction ceased during April and May 2020, with zero development activity taking place during this time as a result of the Covid-19 lockdowns.
The gross profit margin recovered to 12.3 percent (2020: 10.2 percent) from 7.9 percent in August last year.
Headline earnings per share decreased to a loss of 15.17 cents per share (2020: 1.77c profit per share) because of once-off costs. The first-half loss of R39m turned around to a R18m profit in the second half, said Lategan.
Cash and it cash equivalents were R154.6m at year end, with available overdraft facilities of R100m, positioning the group well for robust delivery in the 2022 financial year.
The residential property development business had made a swift recovery after losing three months’ production last year.
There was no longer any need for investment in “long-term” infrastructure at this stage, because the group had sufficient serviced stands.
“Further successes in this business were the construction of the electricity substations at the Fleurhof and the South Hills projects, both nearing completion, and we are enhancing our product offering while keeping sales prices low, which is extremely beneficial to our clients.”
Lategan said South African banks were still approving 100 percent mortgage bonds, which was allowing the group to continue selling existing units, ensuring the business remained operational.
The group was well positioned, with 4 654 opportunities under construction, compared to 2 393 a year ago, and a pipeline of 32 590 opportunities in the Belhar CBD, Fleurhof, Jabulani Precinct in Soweto, Scottsdene, South Hills, Tanganani and Witpoortjie.
He said the group anticipated returning to activity levels that were last seen five years ago within the next few years.
The memorial parks business increased by 65.2 percent, and total cash received increased by 57 percent to R53.6m, with total confirmed Covid-19 sales amounting to R6.9m.
Some 1 769 burial opportunities were sold in the year, compared to 1 057 a year ago, and there was a remaining pipeline of 59 366 burial opportunities, as well as other products at its parks.
BUSINESS REPORT