Calgro M3 Holdings Limited · JSE:CGR
Calgro M3 — Investor Day (July 2018)
43 slides from Calgro M3's investor day presentation, Jul 31, 2018
Slide 1: Investor open day
Investor open day 31 July 2018 www.calgrom3.com
Slide 2: Agenda
Agenda Calgro M3 is a The Environment property and property Residential Property Development related investment Memorial Parks company Residential Rental Investments that is a market leader in the Looking forward development of Residential Developments, Residential Rental Investments as we
Slide 3: The Environment
1 THE ENVIRONMENT
Slide 4: 2018 theme
2018 theme: The challenge for business in the economic world we live in, is compounded by an unstable and changing political landscape. How we adapt to the times will define us going forward.
Slide 5: 2019 theme
2019 theme: Maturing our current businesses to deliver consistent results which enable and support the Group to diversify further. We will be defined by how well we adapt and embrace the every- changing needs of the people we serve.
Slide 6: Residential Property Development
Residential Property 2 Development
Slide 7: Typical Integrated Development
Typical Integrated Development 7
Slide 8: Typical Integrated Development (continued)
Typical Integrated Development (continued) 8
Slide 9: Brand awareness
——"r"" Brand awareness CALGRO M3 Group home today Call 0800 24 46 63 Witpoortjie / South bits Invest in a quality Calgro M3 taney “el
Slide 10: Residential property development business model
Residential property development business model 10
Slide 11: Integrated Developments – The year to date
Integrated Developments – The year to date Difficult political and trading conditions continuing Sentiment is however higher, but a lot of change is required Various project delays – Fleurhof: Power and attempted illegal occupation – Scottsdene: Attempted illegal occupation – Belhar: Water sho
Slide 12: Integrated Developments
Integrated Developments Units under construction (delays experienced on 2,111 5 093 due to electrification, water and illegal occupations) Handed over to customers 826 Serviced opportunities Supports strong circa 9 000 completed and in progress pipeline Sold to commence construction (delays experien
Slide 13: Design, green, and service initiatives
Design, green, and service initiatives New building system currently being investigated and piloted – reducing construction periods for walk-up blocks (Res 3) The new system also reduces the Group’s carbon footprint as it will enhance our greening initiatives during the construction phase of the
Slide 14: Targets
Targets Continue transition from public to private sector Return current month to month sales to growth Two projects secured in KZN with imminent commencement Continue capacity building Calgro M3 provides homes, not merely houses, in a constant drive to change lives and provide South African
Slide 15: Integrated Developments challenges
Integrated Developments Challenges Continued slowdown in public sector spend Cash flow constraints resulting from increased exposure to private sector Changing political landscape Challenging South African labour market Regulatory changes in the development space (Interpretation difference
Slide 16: Accounting – Previous accounting standards
Accounting – Previous accounting standards IAS 18 – Sale of goods & rendering of services • Revenue @ Point of sale / transfer • Cost of sales (inventory) IAS 11 – Construction contract accounting • Contract with customer? • Can customer make structural changes? • Revenue % completion • Example 16
Slide 17: IAS 11 – Construction contract example
IAS 11 – Construction contract example Estimated Revenue R100 Estimated Cost R70 Estimated profit R30 Year 1 actual cost R40 % completion (R40/R70) 57.14% – Revenue recognised R57.14 (57.14% x R100) – Cost of sales recognised R40 – Gross profit R17.14 17
Slide 18: Unit typologies - Accounting IAS
Unit typologies - Accounting Unit Typology IAS 18 IAS 11 Fully subsidised (RDP/BNG) Subsidised Rental - CRU - Social Housing Bulk buyer / REIT / Funds GAP / FLISP Affordable housing High-end units 18
Slide 19: Integrated Developments
Integrated Developments 66.67% of development fully and partially subsidised units Cross subsidisation of revenue and cost Subsidies on infrastructure (Bulk / Link / Internal) Reduction in timelines to obtain infrastructure availability Public amenities not otherwise available Result: No a
Slide 20: New accounting standards IFRS 15
New accounting standards IFRS 15 – Revenue from contracts with customers • Rule based (less interpretation room) • 5 step approach • Identify contract with customer • Identify performance obligation (PO) • Determine transaction price • Allocate transaction price to PO • Recognise revenue when (as) c
Slide 21: IFRS – Timing of revenue recognition
IFRS 15 – Timing of revenue recognition Customer receives benefits as Yes performed/another would not need to re- perform e.g. cleaning service, shipping No Point in time Over time Yes Create/enhance an asset customer controls e.g. house on customer land No Yes Does not create asset w/alternative No
Slide 22: Unit typologies – Accounting IFRS 15
Unit typologies – Accounting IFRS 15 Unit Typology Point in time Over time Fully subsidised (RDP/BNG) Subsidised Rental - CRU - Social Housing Bulk buyer / REIT / Funds GAP / FLISP Affordable housing High-end units 22
Slide 23: Memorial Parks
3 Memorial Parks
Slide 24: Memorial Parks
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Slide 25: Brand awareness
] Brand awareness CALGRO m3 Caigro Ms Memorial Parks #Ri bern ememberHer Died: 2 April 2018 Manage Peomotons ——_— CALGRO M3 Vv L ane (Ld ce | CALGRO M3 1S PROUD TO ANNOUNCE ITS EXPANSION INTO THE WESTERN CAPE. information on our Durbanville For mon Memorial Group 25
Slide 26: Memorial Parks business model
Memorial Parks business model 26
Slide 27: Memorial Parks – The year to date
Memorial Parks – The year to date Expanded the business into two new provinces Western Cape 1 March 2018 Free State 1 June 2018 Exited Nexus Capital for R63,5 mil payable in four equal instalments, interest free Increased monthly sales Built relationships with local communities where par
Slide 28: Memorial Parks – Business model improvements
Memorial Parks – Business model improvements New pricing structure tiers of silver, gold, platinum and diamond - introduced and effective 1 June 2018 Crematorium development with prominent national funeral director where Calgro M3 will receive rental income – No operating risk taken Continuous
Slide 29: Targets
Targets Target >10% contribution for 2019 financial year Crematorium facility to be finalised – Calgro M3 to not carry operational risk and receive rental income Complete installation of the free wireless network at Nasrec Memorial Park, “Calgro M3 Connect” – Direct marketing Avalon Memorial P
Slide 30: Memorial Parks challenges
Memorial Parks Challenges Market acceptance and education (as alternative to traditional cemeteries) Ensuing greater brand awareness and aspiration Policy sales 30
Slide 31: Accounting – IFRS aligned
Accounting – IFRS 15 aligned Rendering of service (interment) • Stand alone selling price (cost + margin) Rendering of service (maintenance) • Cost of maintenance per annum • Capitalise fund to return annual maintenance + CPI • Revenue – cost + 10% margin • Burial – (amortise 10 years) • Reservation
Slide 32: Residential Rental Investments
Residential Rental 4 Investments
Slide 33: Residential Rental Investments
Residential Rental Investments 33
Slide 34: Residential Rental Investments
Residential Rental Investments 1 140 of the 3 852 units in first phase completed and handed over Staggered handover over coming months Fleurhof, Scottsdene and Belhar delayed Jabulani and South Hills to be handed over before end September Acquisition in Ruimsig Further acquisitions and e
Slide 35: Residential Rental Investments challenges
Residential Rental Investments Challenges Lack of available properties in well located metropolitan areas Remaining at the forefront of innovative product offerings Diversification across markets and geographic locations Balancing yield targets with escalating costs 35
Slide 36: Looking forward
5 Looking forward
Slide 37: Project pipeline
. ——— ] Project pipeline CALGRO M3 Group Residential Property Development Anticipated turnover for Number of units/ remaining units Municipality Region - Province Government/Private Progress update Remaining units Rands 82-On-Pine Witkoppen Ext 142 City of Joburg Gauteng Private ‘Awaiting town plann
Slide 38: Our expectations going forward
Our expectations going forward Political and economic conditions to improve but remain subdued in the short term, business and consumer confidence phase – Partial uncertainty both locally and internationally • Less jobs being created than anticipated • Decrease GDP growth forecast • Delayed recove
Slide 39: Our market
Our market Housing and burial site shortfall not to disappear Consumer under financial pressure New consumer funding decrease by up to 10% Greater indebtedness in mid-income market Expect no further interest rate changes (increase or decrease) Despite the desperate need for housing close t
Slide 40: What we continue to work on
What we continue to work on Economic and political landscape How do we assist public sector without reliance? Illegal land grabs Remain relevant to customers Modularity Most efficient and best in class team How do we source funding and control funding risk? 40
Slide 41: Commitment to shareholders
Commitment to shareholders 41
Slide 42: Thank you
Thank you Wikus Lategan (CEO) – Email: wikus@calgrom3.com Waldi Joubert (FD) – Email: waldi@calgrom3.com Tel: +27 11 300 7500 www.calgrom3.com Keyter Rech Investor Solutions – Vanessa Rech Tel: 083 307 5600 vrech@kris.co.za
Slide 43: Disclaimer
Disclaimer Calgro M3 has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this presentation, including all information that may be defined as 'forward-looking statements'. Forward-looking statements may be identified by