Roy Cokayne
CALGRO M3 Holdings believes there are so many opportunities in South Africa that there is no need for the listed affordable housing developer to look outside the country.
This is despite earlier this year expanding its operations into the rest of Africa. The National Housing Enterprise of Namibia awarded it an R812 million contract for the construction of the Otjomuise housing project in Windhoek, which involves the construction of 2 523 residential units in the next three-and-half years.
Ben Pierre Malherbe, the chief executive, said yesterday that the group broke ground last month on this project but it was not Calgro’s ambition to attract projects in the rest of Africa and it was “happy to operate in South Africa”.
However, he admitted it was “nice to open the door” to projects outside the country, adding it was presented with opportunities in Africa all the time.
Calgro yesterday reported an almost 27 percent growth in headline earnings a share to 50.97c in the six months to August from 40.16c in the previous corresponding period.
Revenue declined by 5 percent to R412m from R435m. But operating profit increased by almost 70 percent to R57.2m from R33.7m as gross profit margins improved to 20.07 percent from 14.26 percent.
Malherbe attributed this to the focus on top-structure construction on stands previously serviced. He said gross profit margins were lower during the infrastructure installation cycle of the project and increased during the top-structure construction cycle, resulting in a higher cumulative margin.
A dividend was not declared. Malherbe said the board believed the group must continue to conserve cash to maintain the present growth and create shareholder value.
The group performed well during the reporting period, he said. It had moved forward on key developments and was generating a steady cash flow as it shifted from infrastructure installation to top-structure construction phases and then unlocked capital invested through transfer of ownership.
“While the directors are slightly disappointed by the results and growth, which were lower than anticipated, these were impacted by continued difficult trading conditions in the development and construction industries and a worker strike in the metals sector, which resulted in delays.”
Land for development remained at similar levels as at the end of February this year, with a market value in excess of R1.3 billion and carried at a cost of R550m. This excess should flow through as profits over the next few years.
The secured pipeline was maintained at more than R17bn, with the installation of bulk infrastructure commencing on four new projects during the second half of the company’s financial year.
He said this would convert more of the pipeline into construction projects and result in the group being well placed to secure new opportunities to grow the secured pipeline.
The group’s margins were expected to come under pressure during the next six months as exposure to the installation of infrastructure increased, primarily because of the planned installation of infrastructure on the Belhar, South Hills, Jabulani Hostels, and Vista Park projects. Group margins in the next six months would come off from 20 percent to more normal levels because of bigger exposure to infrastructure, Malherbe said.
He said trading conditions in the construction and development sector remained challenging but the renewed support from the national Department of Human Settlements was encouraging.
Shares dropped 1.75 percent to close at R8.40 yesterday.