CAPE TOWN – Calgro M3 has flagged that it would cut down its headcount and sell capital intensive projects assets in a bid to preserve cash after falling to losses in the six months to end August from a profit during the corresponding period last year.
The group said on Monday that its headline losses rose to R4.1 million during the period from R4m the prior year.
It said it had already eased on new developments in line with the country’s slow economic growth profile.
Chief executive Wikus Lategan said that the group was also exploring the selling of rental units as part of the normal operations to generate cash flow to settle debt.
Lategan said sales for the group, which specialises in the development of affordable housing and memorial parks, came under pressure as a result of declining customer affordability during the period.
He said revenue fell 7.3 percent to R11m, while sales declined 15.4 percent to 473 graves.
Calgro M3 reported a 204.2 percent slide in headline earnings to a loss of 3.24 cents a share.
Lategan said corrective measures were being instituted to return the business to high levels of growth.
Revenue decreased 26.4 percent to R579.5m during the period, while costs associated with low activity resulted in the gross profit margin declining to 7.6 percent from 16.8 percent in 2018.
Lategan said it had been a frustrating six months, but two problematic contracts had “at long last” been resolved, with construction under way, and sufficient cash resources of R445m had been generated for group operational sustainability and to manage risks.
“We have continued to generate positive cash flow in the past 12 months, and in time the income statement will follow. We anticipate a stable, if slightly better performance in the second half,” he said. “We said six months ago it was going to take time, effort and money to resolve these contracts.”
Work at Fleurhof substation was under way after initially experiencing electricity shortages. The illegal invasion of Scottsdene was being resolved and no other Calgro M3 units were currently illegally occupied.
These two contracts had resulted in direct additional costs of R120m, but accumulated time delays and opportunity costs had been “far more,” he said.
“During the difficult economy, we stabilised cash flow through various debtor and progress draw recoveries, which enabled us to support ourselves without having to sell off any of our assets outside of the ordinary course of business,” he said.
During the period, a Sustainable City and Human Settlements Award had been received from the UN.
Calgro M3's share price declined 2.78 percent on the JSE on Monday to close at R3.85.