CALGRO M3 HOLDINGS LIMITED - Unaudited Interim Results for the six months ended 31 August 2013
14 October 2013 7:05
CGR 201310140002A Unaudited Interim Results for the six months ended 31 August 2013 Calgro M3 Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 2005/027663/06) Share code: CGR ISIN: ZAE000109203 (ôCalgro M3ö or ôthe companyö or ôthe Groupö) UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2013 ò Revenue up 8% to R434.6 million ò Profit after tax up 26.96% ò Headline earnings and earnings per share up 26.96% to 40.16 cents ò Net asset value per share up 16% to 298 cents ò Cash on hand of R155 million ò Pipeline in excess of R10 billion CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited Unaudited Audited Six Months Six Months Year ended 31 August 31 August 28 February R'000 2013 2012 2013 Revenue 434 638 400 669 798 394 Cost of sales (372 642) (332 379) (650 436) Gross profit 61 996 68 290 147 958 Net administrative expenses (28 296) (25 770) (58 584) Operating profit 33 700 42 520 89 374 Net finance (cost)/income (2 595) (1 581) (1 540) Share of profit of 27 638 12 434 29 406 Joint ventures(Net of tax) Profit before taxation 58 743 53 373 117 240 Taxation (7 703) (13 176) (25 937) Profit after taxation 51 040 40 197 91 303 Total comprehensive income 51 040 40 197 91 303 Profit Attributable to: Equity holders of the company 51 040 40 197 91 303 Basic and diluted Earnings per share û cents 40.16 31.63 71.84 Basic and diluted Headline earnings per share û cents 40.16 31.63 71.84 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited Audited 31 August 28 February R'000 2013 2013 ASSETS Non-current assets Property, plant and equipment 3 412 4 245 Deferred tax 14 733 13 908 Other non-current assets 183 978 135 101 202 123 153 254 Current assets Inventories 284 823 264 580 Construction contracts and work in progress 250 055 141 483 Trade and other receivables 104 881 45 339 Other current assets 6 381 6 121 Cash and cash equivalents 154 853 198 343 800 993 655 866 Total assets 1 003 116 809 120 EQUITY AND LIABILITIES Equity Capital and reserves 378 397 327 358 Total equity 378 397 327 358 Non-current liabilities Deferred income tax liability 33 885 26 863 Other non-current liabilities 74 215 33 959 27 078 Current liabilities Current borrowings 442 141 299 890 Other current liabilities 148 619 154 794 590 760 454 684 Total liabilities 624 719 481 762 Total equity and liabilities 1 003 116 809 120 Net asset value per share û cents 297.72 257.56 EARNINGS RECONCILIATION Unaudited Unaudited Audited Six Months Six Months Year ended 31 August 31 August 28 February R'000 2013 2012 2013 Determination of headline earnings Attributable profit 51 040 40 196 91 303 Headline earnings 51 040 40 196 91 303 Determination of diluted earnings Attributable profit 51 040 40 196 91 303 Diluted earnings 51 040 40 196 91 303 Number of ordinary shares (æ000) 127 100 127 100 127 100 Weighted average shares (æ000) 127 100 127 100 127 100 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW Unaudited Unaudited Audited Six Months Six Months Twelve months 31 August 31 August 28 February R'000 2013 2012 2013 Net cash from operating activities (167 500) 26 206 12 585 Net cash from investing activities (17 865) (20 678) 8 269 Net cash from financing activities 141 875 43 777 73 798 Net (decrease)/increase in cash and cash Equivalents (43 490) 49 305 94 652 Cash and cash equivalents at the beginning of the year 198 343 103 691 103 691 Cash and cash equivalents at the end of the period 154 853 152 996 198 343 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Retained Total Capital premium income equity (Figures in Rands) Balance at 1 March 2012 1 271 96 020 450 140 032 285 236 054 006 Profit for the period - - 40 196 876 40 196 876 Total comprehensive income for period ended 31 August 2012 - - 40 196 876 40 196 876 Balance at 31 August 2012 1 271 96 020 450 180 229 161 276 250 882 Balance at 1 March 2013 1 271 96 020 450 231 335 823 327 357 544 Profit for the period - - 51 039 752 51 039 752 Total comprehensive income for period end 31 August 2013 51 039 752 51 039 752 Balance at 31 August 2013 1 271 96 020 450 282 375 575 378 397 296 CONDENSED SEGMENT REPORT FOR THE GROUP R'000 Construction Land Land Professional (Figures in Rands) Development Sales Services Total Aug 2013 Revenue - External 428 768 1 963 3 907 434 638 Operating profit/(loss) 30 041 1 415 3 327 34 783 Finance cost (6 581) (7) - (6 588) Adjusted profit/(loss) before tax from reportable segments 23 460 1 408 3 327 28 195 Aug 2012 Revenue - External 312 801 84 196 3 672 400 669 Operating profit/(loss) 39 267 27 3 441 42 735 Finance cost (4 184) - - (4 184) Adjusted profit/(loss) before tax from reportable segments 35 083 27 3 441 38 551 August 2013 Assets Goodwill 28 515 - 4 155 32 670 Inventories 21 022 263 800 - 284 822 Construction contracts 247 823 - - 247 823 Liabilities Borrowings (442 141) - - (442 141) February 2013 Assets Goodwill 28 515 - 4 155 32 670 Inventories 23 199 242 404 - 265 603 Construction contracts 66 884 - - 66 884 Liabilities Borrowings (191 000) (77 768) - (268 768) A reconciliation of adjusted profit/(loss) before tax is provided as follows: R'000 31 Aug 2013 31 Aug 2012 Adjusted profit before tax for reportable segments 28 195 38 551 Share of profit of joint ventures û Net of tax 27 638 12 435 Total Segments 54 750 50 771 Finance income û net 3 993 2 602 Profit before tax 58 743 53 373 COMMENTARY The Directors present the condensed consolidated interim financial results for the six months ended 31 August 2013 (ôthe periodö), which reflect an improvement in a number of key financial indicators. Results of the GroupÆs operations showed improvement in the period under review, despite the tough trading environment in the development and construction sectors. The continuing labour unrest in the Western Cape, delays in electrical supply to the Jabulani project and increased activity in the lower margin installation of services contributed to margins being under pressure. Despite the prevailing negativity, the GroupÆs pipeline has increased. FINANCIAL RESULTS Revenue at group level increased to R 435 million (Aug 2012: R401 million). Profit after tax was R51 million (August 2012: R40,2 million). Headline earnings per share increased by 26,96% to 40,16 cents (August 2012: 31,63 cents) with gross profit margins decreasing to 14,26%(August 2012 : 17,04%). This was as a result of the increased activity in the installation of civil and electrical infrastructure with a lower margin that precedes top structure construction scheduled for the next 18 months, when the margin and related cost from operations will increase again. Revenue in Joint Ventures (JVÆs) increased to R 347 million increasing profits from JVÆs to R 27,6 million (August 2012: R12,4 million). Calgro M3 fulfils the leading role in these JVÆs as development partner and contractor. The GroupÆs cash position remains strong at R 155 million(February 2013 : R 198 million). Working capital continues to be closely monitored, particularly the timeous receipt of debtors and the transfer of properties to clients ensuring that money becomes due and payable. Total net debt increased to R287,3 million (February 2013: R101,6 million), as a result of the Group raising a new R 222 million 36 month unsecured instrument at a variable interest rate of 4,5% above Jibar that expires on 30 June 2016. The capital was utilised to strengthen working capital on long term projects, fast track the installation of infrastructure for future top structure construction resulting in cash from operations being negative R 167 million and to settle secured debt at group level as well as secured Fleurhof (JV) debt. This resulted in the GroupÆs balance sheet now being completely unsecured and aligning the interest of Stakeholders to maximising returns. The statement of financial position remained steady with total assets of R1 billion (February 2013: R 809 million). No significant asset additions or disposals occurred during the period under review. Management is of the opinion that the Group is appropriately structured to support the implementation of the pipeline and future growth. Contract revenue from related parties increased to R 224 million (August 2012: R 183 million). Receivables from JVÆs increased to R 125 million (February 2013: R 57 million) due to the increase of the installation of infrastructure that will be recouped through top structure construction and the inability to register units on the Jabulani project due to power delays. SHARE APPRECIATION RIGHTS SCHEME (SAR) The Share Appreciation Rights Scheme (SAR) of 9,650,000 rights to directors and senior management introduced 1 March 2012 (with a vesting period of 2, 3, 4 and 5 years if a hurdle growth rate linked to the Consumer Price Index (CPI) is exceeded) resulted in an amount of R3 196 971 being recognised as an expense in the Statement of Comprehensive Income for the period to 31 August 2013. OPERATIONAL REVIEW The pipeline was sustained in excess of R10 billion. The installation of bulk infrastructure will commence on two new projects during the second half of the 2014 financial year, converting more of the pipeline into construction projects. The Group experienced a renewed commitment from Government to increase investment in infrastructure allowing the Group to deliver on infrastructure for integrated developments. The six months under review saw an increase in the installation of infrastructure, and although this put the gross margin under severe pressure, it will enable the Group to increase its higher margin construction of top structures during the next six months. The Group benefitted from its exposure to Social Housing and units aimed at the FLISP (Finance Linked Individual Subsidy Programme) market that is currently gaining traction. With the FLISP pilot project successfully completed more units are currently under construction on both the Fleurhof and Jabulani projects. As projected, construction capacity has reached a stage where the use of external contractors is increasing to ensure that quality is maintained and committed time lines with regards to delivery met. This is in line with the GroupÆs commitment to partner with local and emerging contractors. Infrastructure for the second phase of the Fleurhof project (Ext 5, 7 û 11) was completed and construction of 809 units aimed at the bonded market, Breaking New Ground (BNG) market and FLISP market, all contributed towards revenue. The first of 400 units currently under construction for a Social Housing Institute (SHI) reached completion and were handed over and transferred at the end of the reporting period. The investment in infrastructure (in excess of 2400 opportunities) in the third phase was fast tracked and construction of top structures in this phase will contribute during the next eighteen months. New contracts for the construction of 752 units aimed at the Social Housing and BNG markets were concluded. This was complimented by the launch of units aimed at the bonded market. Bulk and link infrastructure as well as internal infrastructure reached completion on the Scottsdene project. The first pocket of 83 fully subsidised housing units was completed and handed over to beneficiaries. This was complimented by the handover of the first of 88 units aimed at the bonded market. The balance of the 88 units aimed at the bonded market, another pocket of 80 fully subsidised units as well as the first 154 Community Residential Units ôCRUö units constructed for the City of Cape Town, will be completed and handed over during the next six months. Uncertainties with regards to the timing of the power supply to the Jabulani CBD projects resulted in construction activity declining substantially, putting project margins under pressure. The construction of the first two land parcels are nearing completion, but with the installation of infrastructure for the next land parcels delayed until certainty with regards to power can be obtained, the project will not be a contributor during the last six months of the 2014 financial year. Construction of the last 36 units in the Jukskei View project will be completed during the last six months of the financial year. A new project aimed at this specific market segment was acquired and delays in the installation of infrastructure for the Witpoortjie project was overcome and will commence during the next reporting period. The first two phases of the Brandwag project in Bloemfontein is nearing completion with 282 units handed over and occupied. Although the third phase of the project was awarded, construction has not commenced as the GroupÆs risk has not been sufficiently mitigated as ôfinancial closureö between contracting parties could not be proven. Construction will not commence until the GroupÆs payment risks have been mitigated. The Mid-to-High income housing sector is still slow in showing a recovery. With the installation of infrastructure for the first phase of the La Vie Nouvelle project (retirement village) completed and sufficient sales having been reached, the construction of top structures commenced during August. All debt associated with this market segment has been settled and the Group will continue to ôlandbankö these properties. HEALTH & SAFETY The Group maintained its exceptional safety record and was again free of fatality and serious injuries in the workplace. The Group will strive to maintain its target level of zero harm. PROSPECTS Trading conditions in the construction and development sector remain challenging, but support from local government and strong end user sales in the FLISP, GAP and Affordable markets are all contributing in making integrated developments based on Private Public Partnerships successful. GovernmentÆs undertaking to close the gap between fully subsidized housing and the entry level affordable bonded market by providing Social Housing and the newly revised FLISP units is continuing to create exciting new opportunities and the Group is well positioned to make use of opportunities presented. Any reference to prospects included in this announcement has not been reviewed by the GroupÆs external auditors. CORPORATE GOVERNANCE The directors and senior management of the Group endorse the Code of Governance Principles and Report on Governance, together referred to as King III. Having regard to the size of the Group, the Board is of the opinion that the Group substantially complies with King III and with the Listings Requirements of the JSE Limited. The Group performs regular reviews of its corporate governance policies and practices and strives for continuous improvement in this regard. APPRECIATION Our management team has been instrumental in ensuring that growth has been sustained. We thank them and look forward to continuing on this successful path of creating value for our shareholders. We would also like to thank our partners, clients and shareholders for maintaining confidence in us. NOTES 1. Basis of preparation These consolidated condensed financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) on Interim Financial Reporting IAS34, SAICA financial reporting guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council, the South African Companies Act and the Listings Requirements of the JSE Limited. The accounting policies are consistent with those used in the annual financial statements for the year ended 28 February 2013. The financial statements have been prepared by Mr WA Joubert CA(SA) under supervision of Mr WJ Lategan CA(SA) and were approved by the board on 11 October 2013. 2. Independent audit These consolidated condensed interim financial statements have not been audited or reviewed by the groupÆs external auditors. 3. Dividends No dividends have been declared for the period. The Board is of the opinion that the Group must continue to conserve cash to fund the present growth and create shareholder value. BP Malherbe (Chief executive officer) WJ Lategan (Financial director) Johannesburg 14 October 2013 Directors: PF Radebe (Chairperson)*, BP Malherbe (Chief executive officer), WJ Lategan (Financial director), FJ Steyn, DN Steyn, JB Gibbon*#, H Ntene*, R Patmore*# ,ME Gama*#) (*Non-executive) (#Independent) Registered office: Cedarwood House, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston 2196. (Private Bag X33, Craighall 2024) Transfer secretaries: Computershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107) Sponsor: Grindrod Bank Limited Auditors: PricewaterhouseCoopers Inc. www.calgrom3.com Date: 14/10/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.
distributed by