Calgro M3 Holdings Limited · JSE:CGR
Calgro M3 — H1 2017 Earnings Presentation
43 slides from Calgro M3's earnings presentation, 2016
Slide 1: Calgro M3 Group
CALGRO M3 Group www.calgrom3.com Building legacies. Changing lives
Slide 2: Agenda
Agenda Introduction and highlights Business model Financial review Operational review and prospects Challenges and risks 2
Slide 3: Introduction and highlights
Introduction and highlights 1
Slide 4: Calgro M3
Calgro M3 Through a cost effective Integrated Professional Memorial turnkey Developments Services Parks solution Property development * A Real Estate Investment Trust (REIT) is a new initiative, results of which are not included in this 4 set of results, however this will be a segment going forward
Slide 5: Results highlights
Results highlights Revenue EBIT HEPS 25.7% to 11.4% to 1.7% to R720.2 million R119.6 million 65.13 cps Cash Combined Net debt:equity (generated from operations) revenue 195% to 9.9% to 0.53 R94.2 million R924.7 million (Feb 2016: 0.59) Zero fatalities during the period 5
Slide 6: Integrated Developments sector
Integrated Developments Mid-to-high Income Housing (Calgro M3 has the ability to move between sectors) Affordable Housing Private Sector GAP & FLISP Rental accommodation Public & private Community Residential Unit (CRU) & Social Housing Public BNG (fully subsidised) 6
Slide 7: Memorial Parks
Memorial Parks R30 000+ • Focus on family burials S e c t o r R25 000 • Direct pre-death sales • Lower-end facilitated through R 20 000 customised funeral policies for P r i v a t e R15 000 entire family • Annuity income R10 000 and below 7
Slide 8: Residential portfolio market
Residential portfolio market Housing shortage compounded by absence of Public Sector infrastructure budget Lack of sufficient rental opportunities in metropolitan areas High barrier to entry into property development Government commitment to eradicating housing shortfalls, but unable to do s
Slide 9: REIT structure
REIT structure 100% 100% Calgro M3 Real AFHCO Holdings Ltd Estate (Pty) Ltd 51% 49% 4 Directors 3 Directors Managed and controlled AFHCO Calgro M3 (Pty) Ltd 9
Slide 10: REIT phases
REIT phases Acquisition of property portfolio Phase 1 from Calgro M3, valued at R1.6 billion Future acquisitions from Calgro Phase 2 M3’s pipeline, other developer and acquiring established portfolios Portfolio of R10 billion to R15 Target billion 10
Slide 11: Business model
Business model 2
Slide 12: Culmination of initiatives
Culmination of initiatives Underlying theme of property development Diversification Annuity income Trapped margin in turnkey model Supporting the eradicating of housing shortage Making a difference in the lives of stakeholders 12
Slide 13: Turnkey Approach
Turnkey Approach Township establishment In-house town planning, urban design, architecture and various other professional services. Control development timelines. CALGRO M3 Wiis Installation of roads, stormwater, water, sewer and electrical Turnkey Approach Handover to clients Quality assurance rece
Slide 14: Residential Pipeline as at Feb 2016
Residential Pipeline as at Feb 2016 Total no. of units Total no. of units still to be Revenue to Gauteng in project completed and /or in progress completion - Rm Fleurhof - Jhb 10 411 4 133 2 235 Jabulani CBD – Parcels A,B,C & D – Soweto 2 460 1 160 401 Jabulani CBD - Parcel K - Soweto 1 410 1 410 5
Slide 15: Memorial Park Pipeline as at Feb 2016
Memorial Park Pipeline as at Feb 2016 Total no. of burial Total no. of units still to be Revenue to completion Gauteng plots in project completed and /or in progress Rm Nasrec - Gauteng 46 271 46 036 1 241 Fourways – Gauteng 36 000 12 000 420 Memorial Park Total 82 271 58 036 1 661 Residential Total
Slide 16: Financial review
Financial review 3
Slide 17: Reminder
Reminder Purchased remaining 30% shareholding in Fleurhof As from 29 February 2016, Fleurhof Ext 2 accounted for as subsidiary and no longer as a joint venture Effect is an increase in revenue, cost of sales and gross profit of the Group, and a decrease in share of profits from joint ventures and as
Slide 18: Comprehensive Income
Comprehensive Income R’000 Change Unaudited Unaudited Audited % 6 months 6 months Year end 31 Aug 2016 31 Aug 2015 29 Feb 2016 Revenue 25.7 720 233 573 195 1 204 064 Cost of sales 18.7 (539 331) (454 175) (952 517) Gross profit 52.0 180 902 119 020 251 547 Gross profit margin 25.1% 20.8% 20.9% Other
Slide 19: Financial position - assets
Financial position - assets R’000 Change Unaudited Audited % 6 months Year end 31 Aug 2016 29 Feb 2016 Non-current assets 2.1 186 649 182 734 Property, plant & equipment 3 854 3 827 Intangible assets 159 016 159 039 Investment in joint ventures & associates 11 279 6 080 Other 12 500 13 788 Current a
Slide 20: Financial position – Equity & liabilities
Financial position – Equity & liabilities R’000 Change% Unaudited Audited 6 months Year end 31 Aug 2016 29 Feb 2016 Total Equity 11.8 916 262 819 789 Total liabilities 1.1 1 125 410 1 112 711 Borrowings 525 503 538 463 Other liabilities 599 907 574 248 Total equity and liabilities 5.1 2 041 672 1 94
Slide 21: Cash flow
Cash flow R’000 Change Unaudited Unaudited Audited % 6 months 6 months Year end 31 Aug 2016 31 Aug 2015 29 Feb 2016 Net cash generated from operating activities 194.9 94 224 31 951 35 511 Net cash utilised in investing activities (97 194) (1 304) (140 533) Net cash (utilised in)/from financing activ
Slide 22: Capital expenditure
Capital expenditure Item R’000 Cash generated from operations 130 953 Investment 67 696 Witpoortjie 10 123 La Vie Nouvelle 14 125 Fleurhof 14 579 Belhar 15 765 Summerset 13 104 Adjusted cash generated from operations 198 649 22
Slide 23: Cash flow cycle: Identify project & due diligence
Cash flow cycle 01 Identify project 01 & Due diligence Identify project & Due diligence Determine target market, environmental studies, funding requirements 0 - 6 months R0 – R2m 23
Slide 24: Cash flow cycle: Secure land
Cash flow cycle 02 02 Secure land 01 Secure land Identify project & Due diligence Land ownership enables control of the development process & choice of partners 6 months R0 - R50m 24
Slide 25: Cash flow cycle: Township establishment
Cash flow cycle 02 03 Township Secure land 01 Township establishment establishment Identify project 03 In-house town planning, urban & Due diligence design, architecture and various other professional services. Control development timelines 18 - 36 months R0 (Included in overheads) 25
Slide 26: Cash flow cycle: Infrastructure
Cash flow cycle 02 04 Infrastructure 01 Secure land Township establishment Identify project 03 & Due diligence Installation of roads, stormwater, water, sewer Infrastructure and electrical infrastructure are all tendered out 04 6 - 9 months R50 - R100m (Depending on phase & size) 26
Slide 27: Cash flow cycle: Marketing & sales
Cash flow cycle 02 05 Marketing & Sales 01 Secure land Township establishment Identify project 03 & Due diligence Marketing of residential units Infrastructure and burial sites. Core to our business model 04 Marketing 6 - 9 months & Sales 05 R5m - R10m (Depending on phase & size) 27
Slide 28: Cash flow cycle: Transfer to end user
Cash flow cycle 02 06 Transfer to end user 01 Secure land Township establishment Identify project 03 & Due diligence Full title transfer Infrastructure Free-hold, affordable market 04 Marketing 1 month & Sales Transfer to end user 05 Conveyancing cost 06 28
Slide 29: Cash flow cycle: Construction
Cash flow cycle 02 07 Construction 01 Secure land Township establishment Identify project 03 & Due diligence Majority of construction is done in-house and capacity Infrastructure is supplemented by the appointment of subcontractors 04 Marketing 3 - 18 months 07 & Sales Construction Transfer to end u
Slide 30: Cash flow cycle: Handover to clients
Cash flow cycle 02 08 Handover to clients 01 Secure land Township establishment Identify project 03 & Due diligence Quality assurance receives 08 Infrastructure high priority Sectional title Handover to clients 04 Marketing 1 month 07 & Sales Construction Transfer to end user 05 In-house capacity 06
Slide 31: Operational review and prospects
Operational review and prospects 4
Slide 32: Integrated Development during the 6 months under review
Integrated Development during the 6 months under review 4 524 houses under construction 5 239 opportunities being serviced Top structure construction & Bulk Phase I & II infrastructure installation in Projects delayed infrastructure completed various stages of completion (design phase) • Witpoor
Slide 33: Professional Services
Professional Services Includes various in-house services to identify projects, due diligence, securing land, township establishment and town planning Contribution to Group and REIT structure Intention is not to grow division outside of internal requirements 33
Slide 34: Memorial Parks
Memorial Parks Burial site and funeral policy sales steadily increasing Marketing and insurance partnership with Constantia making impact Acquisition of Fourways Memorial Park – R24,5 million purchase consideration – Memorial park business and associated essential skills and experience – Effec
Slide 35: Challenges and risks
Challenges and risks 5
Slide 36: Challenges and risks
Challenges and risks Item Integrated Memorial REIT Developments Parks Macro environment X BEE Compliance X Exposure to Government X Retention of staff X X Cash flow, uncontrolled X X X growth and capacity Reputational damage due to X X X sub-standard workmanship 36
Slide 37: Markets
Markets Market questions? Exposure to Government Effect of interest rate hikes Effect of depreciating currency Increased competition Possible saving on supplies due to increased growth Effect of general economic slow down Political environment 37
Slide 38: Prospects
Prospects Integrated Developments Government remains committed to catalytic and mega housing projects REIT will assist with increasing scale in private sector (maximum sales of 50% to REIT) Continued focus on marketing and education Expect economy to remain subdued Memorial Parks Increasin
Slide 39: Take away
Take away Diversification to ensure sustainability Underlying theme of property development Solid strategy and in-depth industry knowledge Understanding of Government and how to interact with this strategic stakeholder Excellent reputation established in industry Flexibility to move betw
Slide 40: Management changes
Management changes Changes in line with the Group’s succession strategy announced May 2015 when; Manda Nkuhlu was appointed to Group Exco; and Wikus Lategan was appointed as Managing Director Changes effective 1/3/2017 Ben Pierre Malherbe step down as CEO to become Non-Executive director Wik
Slide 41: Thank you
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Slide 42: Investor relations contacts
Investor relations contacts Ben Pierre Malherbe (CEO) – Email: benpierre@calgrom3.com Wikus Lategan (MD) – Email: wikus@calgrom3.com Waldi Joubert (FD) – Email: waldi@calgrom3.com Tel: +27 11 300 7500 www.calgrom3.co.za 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