AUDITED annual RESULTS FOR THE

Transcription

1 AUDITED annual RESULTS FOR THE year ENDED 29 February 2016 Operating profit 91.2% to R160.2 million (2015: R83.8 million) Earnings per share (2015: cents) 33.3% to cents Headline earnings per share 26.7% to cents (2015: cents) A strong pipeline of R27 billion Net Debt to Equity at a healthy ratio of 0.59 (2015: 0.62) Zero fatalities Calgro M3 Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 2005/027663/06) Share code: CGR ISIN: ZAE ( Calgro M3 or the Group or the Company )

2 Condensed Consolidated Statement of Comprehensive Income R Feb Feb 2015 Revenue Cost of sales ( ) ( ) Gross profit Other income Other expenses (5 757) (691) Administrative expenses ( ) (98 900) Operating profit Share of profit of joint ventures and associates Net of tax Net finance income/(cost) (2 479) Profit before tax Taxation (46 090) (22 520) Profit after taxation Profit after taxation and other comprehensive income attributable to: - Owners of the parent Non-controlling interests (991) (87) Total comprehensive income Profit after taxation attributable to: Equity holders of the Company Earnings per share cents Headline earnings per share - cents Fully diluted earnings per share - cents Fully diluted headline earnings per share - cents Earnings Reconciliation Determination of headline and diluted headline earnings Attributable profit Loss/(profit) on disposal of property 79 (83) Gain on deemed disposal of interest in joint venture (17 632) (6 222) Headline and diluted headline earnings Determination of earnings and diluted headline earnings Attributable profit Earnings and diluted earnings Number of ordinary shares ( 000) Weighted average shares ( 000) Fully diluted weighted average shares ( 000)

3 Condensed Consolidated Statement of Financial Position R 000 as at 29 Feb 2016 as at 28 Feb 2015 Assets Non-current assets Property, plant and equipment Deferred income tax asset Intangible assets Investment in joint ventures and associates Investment property Current assets Inventories Construction contracts and work in progress Trade and other receivables Other current assets Cash and cash equivalents Total assets Equity and Liabilities Equity Stated capital Share-based payment reserve Retained income Non-controlling interests (1 078) (87) Total equity LIABILITIES Non-current liabilities Deferred income tax liability Current liabilities Borrowings Other current liabilities Total liabilities Total equity and liabilities Net asset value per share - cents Net tangible asset value per share - cents Condensed Consolidated Statement of Cash Flows Net cash generated from operating activities Net cash invested in investing activities ( ) (25 576) Net cash from financing activities Net increase in cash and cash equivalents (50 494) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

4 Condensed Consolidated Statement of Changes in Equity R 000 Stated capital Share-based payment reserve Retained income Total Non-controlling interests Total equity Balance at 1 March Profit for the period (87) Total comprehensive income for year ended 28 Feb (87) Balance at 1 March (87) Reclassification of Share Appreciation Rights liability Share-based payment expense Profit for the period (991) Total comprehensive income for year ended 29 Feb (991) Balance at 29 Feb (1 078) Condensed Segment Report for the Group R 000 Feb 2016 Property Development Professional Services Memorial Parks Total Total segment revenue Revenue of joint ventures and associates Combined revenue Operating profit (1 894) Finance costs (18 742) - (36) (18 778) Adjusted profit before tax (1 930) Feb 2015 (restated) Total segment revenue Revenue from joint ventures and associates Combined revenue Operating profit Finance costs (12 229) - - (12 229) Adjusted profit before tax

5 Condensed Segment Report for the Group - continued Feb 2016 Property Development Professional Services Memorial Parks Total Assets per segment: Goodwill Inventories Work in progress Construction contracts Feb 2015 (restated) Assets per segment: Goodwill Inventories Work in progress Construction contracts A reconciliation of adjusted profit before tax is provided as follows: 29 Feb Feb 2015 R 000 Adjusted profit before tax for reportable segments Group overhead cost (5 326) (2 234) Share of profit of joint ventures and associates Profit before tax, finance income and finance cost Finance income Profit before tax Reportable segment assets are reconciled to total assets as follows: Segment assets for reportable segments Unallocated: Deferred tax Investment property Property, plant and equipment Intangible assets excluding goodwill Investment in joint ventures and associates Loans to joint ventures Loans and receivables Current tax receivable Trade and other receivables Cash and cash equivalents Total assets per the consolidated statement of financial position

6 Reportable segment liabilities are reconciled to total liabilities as follows: R Feb Feb 2015 Segment liabilities for reportable segments - - Unallocated: Borrowings Deferred tax Current tax Trade and other payables Total liabilities per the consolidated statement of financial position Related Party Transactions Compensation paid to key employees and personnel Finance income from related parties Contract revenue received from joint ventures Services fees received from joint ventures

7 COMMENTARY NATURE OF BUSINESS Calgro M3 is a property developer, focused on the lower end of the residential market through largescale Integrated Developments and the development of Memorial Parks. INTRODUCTION Calgro M3, for the sixth consecutive year, delivered a solid set of financial results despite difficult market conditions. The Group s focus over the past year was to ensure that more projects in the pipeline were converted into construction projects and thus contributed to revenue. The Group was successful in this and currently has 12 of its 17 residential projects in the ground, ensuring that risk is sufficiently spread over projects, provinces and customer bases. It has also launched its pilot Memorial Park project. The secured pipeline increased from R19 billion to R27 billion. This will ensure enough construction work for the next seven to eight years. It is the Group s goal to extend the pipeline further and provide stakeholders with an estimated 10 year visibility. CHANGES IN THE SEGMENTAL REPORT During the year under review a decision was taken to align the segmental report to the Group s current and future strategic goals. With Calgro M3 Memorial Parks starting to contribute to revenue and profit, the following three segments are reported on: 1) Property Development; 2) Professional Services; and 3) Memorial Parks. OPERATIONAL AND FINANCIAL PERFORMANCE Property Developments During the year a total of houses were constructed and additional opportunities were serviced, bringing the total number of available serviced opportunities for the year ahead to Fleurhof remains a flagship project and is recognised by the Department of Human Settlements as a premium integrated project in South Africa. The project accounts for just over half of the current revenue of the Group. The Jabulani CBD development and Jabulani Hostels redevelopment remain challenging projects, with delays experienced as a result of regular community action and limited availability of bulk amenities. However good progress was made to stabilise the situation and build community relations. This project will be a bigger contributor towards revenue during the year ahead. With the phased infrastructure installation on the Witpoortjie, South Hills, Summerset and La Vie Nouvelle projects, a priority during the past financial year, the Group is now well placed to enhance revenue and cash flow contributions from these projects in the year ahead and actively reduce reliance on the Fleurhof project. Sales at the Group s La Vie Nouvelle retirement development remained slow. After a relaunch of the development and an improved marketing plan and sales drive, sales volumes improved substantially. On the Scottsdene project most of the units that were sold have been constructed and handed over. Although a fair amount of debtors were collected post financial year-end, this project made a positive contribution to the Group during the financial year. Another positive contribution is expected in the year ahead. The first 629 units in the Belhar project are well underway, with bulk infrastructure upgrades on the future phases expected to commence during the latter part of the new financial year. This will see an additional units coming into the market. The Brandwag project in the Free State is nearing completion and all regulatory approvals for the new Vista Park project have been received, making the commencement of infrastructure installation imminent. In Namibia the contractors are back on site after contractual delays as a result of all government funded housing projects in Namibia being placed on hold by the Namibian Government pending an investigation by the National Department of Housing into local housing schemes. The Calgro M3 project was cleared at the end of February 2016, with building recommencing during March Professional Services The Professional Services segment continued to add value in the turnkey business model and ensured that profits from this segment were retained in the Group. A new architectural department was added to this segment towards the end of the 2016 financial year which will result in additional value-add. Memorial Parks The launch of the first Memorial Park project was not without challenges, but the Group is pleased to report that sales are increasing and that it remains 7

8 committed to this business as a significant contributor in future. Marketing effort is being focused on funeral directors, who are the first port of call with respect to advising on funerals, and great strides were made in building relationships in this area. From a financial position, with the sales improving, several potential bulk deals are being negotiated. The contribution to the current financial year was negligible as sales only started increasing towards the end of the financial year. Financial Review A growth in revenue of 29.2% to R1.2 billion (2015: R932 million) and in combined revenue of 38.1% to R2.3 billion (2015: R1.6 billion), supported growth in operating profit and earnings. On a segmental basis Property Development contributed 98.2%, Professional Services 1.7% and Memorial Parks 0.1% to the total revenue of the Group. An increase in operating profit of 91.2% to R160.2 million (2015: R83.8 million) was due to the increase in revenue, in combination with the increase in the gross profit margin and limited increase in administrative expenses. Calgro M3 successfully acquired the remaining 30% of the Fleurhof project for a total consideration of R243 million towards the end of the financial year. The impact of the acquisition on the statement of comprehensive income sees a fair value gain on the deemed disposal of the previously held 70% shareholding in the joint venture of R17.6 million, that is accounted for in other income (excluded from HEPS) and the corresponding goodwill of R118.3 million on the deemed acquisition of 100% of Fleurhof, which accounts for the main increase in intangible assets. Fleurhof is accounted for as a subsidiary of the Calgro M3 Group at 29 February 2016 for statement of financial position purposes, with income during the year remaining at a joint venture level. This acquisition resulted, amongst others, in a R702 million increase in construction contracts and work-in-progress, and a R173 million increase in the deferred income tax liability (see 2016 Integrated Annual Report for further details). The gross profit margin increased from 18.8% to 20.9% due to a better mix between infrastructure installation and top structure construction across the projects in the ground. Basic earnings per share (EPS) increased by 33.3% to cents per share. Headline earnings per share (HEPS) increased by 26.7% to cents per share. The main differences between EPS and HEPS is a R17.6 million deemed fair value gain on the acquisition of the remaining 30% stake of the Fleurhof project. Finance income increased significantly as a result of funding provided to various joint ventures through working capital where interest is charged on debtors balances. This is to fast track projects by investing in their early completion. A further increase resulted from interest earned on debtors balance related to the sale of the four pockets of land. This strategy remains within the realm of Calgro M3 s strategy to unlock working capital tied up in inventory. The Fleurhof acquisition resulted in pressure on cash-onhand at year-end, which is down 38.7%, with only R46.3 million in new debt raised during the year. Nonetheless, the Group has sufficient short-term receivables to build up cash resources post the year-end. The majority of the working capital increase is attributable to the acquisition of Fleurhof, where construction contracts consist of partially and installed services on future phases that will be developed in the 2017, 2018 and 2019 financial years. Unfortunately funds to the value of R67.5 million were not received from the registration of 184 sectional title units before year-end. Once sectional title and property transfers are complete, cash flow is expected to increase in May In addition, a large number of affordable units were delayed due to various external factors, outside of the Group s control. The total amount in excess of R100 million, is expected to be received by end of May These amounts, together with amounts owing from Government and bulk transactions that only became due after year-end (for which commitments for payment before end of May 2016 have been received), will restore the Group s healthy cash position. Calgro M3 successfully restructured the majority of its debt maturing in the 2017 financial year in addition to the early settlement of two bonds prior to their maturity dates, with payment made from operating cash. Although the land portfolio is carried in the financial statements at a value of R453 million, the total external valuations of the Group s land portfolio, excluding joint venture partner interests, have been maintained in excess of R1.36 billion. New Share Schemes: During the financial year, two significant changes took place to the historical cash settled Share Appreciation Rights (SAR) scheme. These changes included i) the conversion of the old cash settled SAR scheme to an equity settled executive share scheme for some participants; and ii) settlement of participants that chose not to convert to the equity settled scheme. Refer to the circular included in the 2015 Notice of AGM and Resolution passed in respect of the Executive Share Incentive Scheme, and 2016 Integrated Annual Report for details. 8

9 SUSTAINABILITY The Group remains fully committed to sustainability. A detailed Sustainability Report is available on the website at PROSPECTS It is expected that Government will slow down on infrastructure spend. In the case of housing however, it remains committed to the rollout of catalytic and mega projects and Calgro M3 is well positioned to benefit in this regard. The acquisition of the Leratong development after year-end is a case in point, where Calgro M3 together with McCormick Property Development and Sasuka, have joined forces to provide some residential units. With 12 projects in the ground at different phases and the expectation that the Vista Park, Leratong and the Kwa Nobuhle projects will commence with bulk infrastructure in the third and fourth quarter of the new financial year, Calgro M3 is well diversified to weather difficult trading conditions. Calgro M3 expects that economic growth will be low and that consumers will remain under pressure. The Group remains confident in its ability to switch between product categories in order to keep the financial performance acceptable. Statements contained in this announcement, regarding the prospects of the Group, have not been reviewed or audited by the Group s external auditors. SAFETY The Group is pleased to report that from an Occupational Health and Safety perspective, it was once again fatality-free despite growth in both activity and workforce, having created in excess of jobs during the year. Unfortunately it was not accidentfree. An incident occurred where three members of the workforce were admitted to the Milpark Hospital after an electric shock. All three individuals have recovered. Although no further serious injuries occurred in the work place, the injuries sustained are viewed in a serious light and the Group will endeavour to continuously aim at achieving its target of zero harm in the workplace. PROJECT RECOGNITION Calgro M3 again achieved high recognition for its projects, being awarded the best FLISP (Finance Linked Individual Subsidy Programme) project of the year, best social housing project and the best integrated project of the year at the 2015 Govan Mbeki Awards. BOARD OF DIRECTORS AND OPERATIONAL MANAGEMENT The Group retained the services of all Executive Directors of the Board with the exception of Deon Steyn resigned in June Waldi Joubert and Wayne Williams were appointed as Executive Directors in June John Gibbon retired as Non-Executive Director and chairman of the Audit Committee during January 2016, with Hugh Cameron being appointed in May 2015 to replace John upon his retirement. Venete Klein joined the Board in January 2016, bringing a farreaching skills set that will further benefit the Group. Operational management has been strengthened by the appointment of skills necessary to ensure that each area within the Group s turnkey integrated development model is staffed with the correct expertise and experience. NOTICE OF ANNUAL GENERAL MEETING AND INTEGRATED ANNUAL REPORT Notice is hereby given that the Annual General Meeting of the Company will be held at 10h00 on 1 July 2016 at Calgro M3 Boardroom, Calgro M3 Building, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, Sandton, whereby shareholders of the Company will be entitled to transact business as stated in the notice of the Annual General Meeting. The record date to participate and vote at the Annual General Meeting, in terms of section 62(3)(a), read with section 59(1)b, of the Companies Act, is Friday, 24 June The last date to trade to be able to attend, participate and vote at the annual general meeting is Friday, 17 June The Company s Integrated Annual Report containing the audited annual financial statements for the year ended 29 February 2016 and the Notice of Annual General Meeting are available on the Company s website from today and will be posted to shareholders on or about 30 May APPRECIATION The production of a satisfactory set of results does not come without dedication from management, staff, contractors, suppliers and other stakeholders in the process. Calgro M3 remains committed to Building homes and changing lives and will continue on this path to ensure South Africans have homes and environments which close the social gap. Calgro M3 wishes to thank shareholders and financiers for their continued support. 9

10 NOTES 1. Basis of preparation The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements and the requirements of the Companies Act applicable to summarised financial statements. The Listings Requirements require summarised consolidated financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial statements from which the summarised consolidated financial statements were derived are in terms of International Financial Reporting Standards and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements. The consolidated financial statements have been prepared by Mr WA Joubert CA (SA) and were approved by the Board on 10 May Independent audit The summarised consolidated financial statements are extracted from audited information, but are not themselves audited. The consolidated annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited consolidated annual financial statements and the auditor s report thereon are available for inspection at the Company s registered office. The Directors take full responsibility for the preparation of the summarised consolidated financial statements and for ensuring that the financial information has been correctly extracted from the underlying annual financial statements. 3. Dividends The Board of Directors has, owing to the fact that Calgro M3 is in a steep growth phase, the challenging economic climate and tough trading conditions, resolved not to declare a dividend for this reporting period, thereby retaining the available cash to fund growth in the Group. BP Malherbe (Chief Executive Officer) WJ Lategan (Managing Director) Johannesburg 10 May 2016 Directors PF Radebe (Chairperson)*, BP Malherbe (Chief Executive Officer), WJ Lategan (Managing Director), WA Joubert (Financial Director), FJ Steyn, W Williams, V Klein*, H Ntene*, R Patmore*, ME Gama*, HC Cameron*. (*Independent Non-Executive) Registered office Calgro M3 Building, Ballywoods Office Park, 33 Ballyclare Drive, Bryanston, (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 Website 10