Calgro M3 Ahead of Multi-Year Net Debt Reduction Targets

Real estate developer and investor Calgro M3 says it has come a long way since it began its efforts to rationalize and transform its portfolio in 2016, especially as the company is also emerging from what has been heavy impact. of Covid-19.

The group posted a 262% increase in net earnings per share to 42.79 cents for the six-month period ended Aug. 31, compared to an overall loss per share of 26.29 cents recorded for the corresponding period of 2020.

“This performance clearly reflects our continued sales efforts and the increased focus on brand awareness through integrated residential developments and [the] development of the segments of the company’s memorial parks, ”said the CEO Wikus Lategan.

The company reduced its overhead costs by 23% during the period under review, demonstrating its ability to manage costs and efficiency in the current economic environment.

Lategan expects Calgro’s overhead costs to increase as more units are built and private sector marketing is undertaken.

Meanwhile, Calgro’s liquidity management over the past few years, coupled with strong cash generation of R133 million during the period under review, resulted in a reduction in its net debt to equity ratio to 0. , 84: 1, well ahead of its February 2022 target ratio of 0.9: 1.

Lategan says the company’s liquidity will be further improved with the sale of some remaining retail, commercial and rental properties, as well as some non-core projects, some of which are nearing completion.

The company has cash on hand of 215 million Rand, while its cash position stands at 615 million Rand.

Calgro’s gross margin reached a four-year high of 19.7%, justifying the decision to shut down and outsource the construction portion of the business.

In the group’s residential real estate development activity, nine projects are under construction, including seven cash generators. These include properties in the Western Cape and Gauteng and amount to 5,000 units.

Projects are diversified across markets, some being wholesale transactions and others rental based. About 12% of them are led by the public sector.

Lategan says the company has enough opportunities with and without services available in its projects to fuel growth for the foreseeable future, without having to take undue risk in acquiring new projects.

He expects the low interest rate environment to improve home sales for at least the next half of the year.

The Calgro Memorial Parks segment saw an increase in total cash inflows during the reporting period of 52.7% to just under Rand 40 million.

The company is showcasing a new entry-level product at Nasrec Memorial Park, offering a grave for immediate burial for R13,000. This diversification in product offering has attracted a new market that previously could not afford a falls into this park and resulted in market share gains in Gauteng for the company.

Calgro will also soon be offering a loan facility, in partnership with Nedbank, for customers to purchase a grave, making memorial parks even more accessible.

DIVIDEND

Discussing if a dividend is on the cards anytime soon, Lategan says Engineering New that 2016 to 2019 was a time of challenges and restructuring.

“We have set specific goals, including reducing our net debt to equity ratio to 0.9: 1, the following year to 0.8: 1 and again to 0.75: 1. Although we are ahead of the goal for this year, we are not yet at our ultimate level.

“We started with a net debt to equity ratio of 1.36: 1, showing the substantial improvement in the ratio so far. “

Next, from a capital allocation perspective, Lategan claims that the company has taken into account various risks and generated income, while reducing overhead costs.

Calgro aims for a low cost base, having sufficient operating capital in a growing phase of the business and maintaining sufficient levels of liquidity.

The company plans to proceed with share buybacks rather than short- and medium-term dividends.

Lategan says the group is well positioned to capitalize on market demand with cash generation and prudent capital allocation remaining the priority areas. Calgro will also continue to maintain higher cash balances and available facilities for the foreseeable future.

The company has been keen to become more resilient to economic conditions and the impacts imposed by unforeseeable events, such as Covid-19.

In conclusion, Lategan laments that the provision of affordable housing is a vital component of efforts for social transformation and empowerment of national and local governments; affordable housing is not only about providing shelter, but also about improving the quality of life, providing opportunities and supporting dignity.

He adds that the company is working to do as much as possible to make the cost of running homes as affordable as possible for residents, with less water and electricity by implementing gas, solar farming. and solar, heat pumps, induction geysers, energy saving lights and prepaid meters, as well as rainwater harvesting.

The environmental and social impact that pushes Calgro to build responsible integrated developments continues to constitute a viable solution to the housing crisis in the country.

Ann J. Cox