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CALGRO M3 HOLDINGS LIMITED - Summarised audited consolidated financial results for the year ended 28 February 2018

Release Date: 14/05/2018 07:05
Code(s): CGR     PDF:  
Wrap Text
Summarised audited consolidated financial results
for the year ended 28 February 2018

Calgro M3 Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/027663/06)
Share code: CGR  ISIN: ZAE000109203
("Calgro M3" or "the Company" or "the Group")

Summarised audited consolidated financial results
for the year ended 28 February 2018

Highlights
- Core headline earnings increased by 6.97% to 143.47 cents per share ("cps")
- Headline earnings decreased by 32.28% to 90.12 cps
- Combined revenue increased by 16.71% to R2.3 billion
- First international funding of R387 million (Euro 25 million) secured
- Level 1 B-BBEE contributor
- First 648 units completed and handed over to the Afhco Calgro M3 Consortium (Pty) Ltd (REIT JV)
- Memorial Parks contributed 5.14% of Group profit after tax
- Property Development and Memorial Parks Project pipeline of R27.5 billion

Commentary

Nature of business
Calgro M3 is a property and property-related investment company that is a market leader in the
development of Integrated Residential Developments, Residential Rental Investments as well as 
the development and management of Memorial Parks.

Introduction
Our performance over the past year was lower than our internal expectation due to weak economic
conditions, market volatility and cash flow constraints. The latter resulting primarily from 
delays in securing working and investment capital to support and enable our increased focus on 
the private sector in our Residential Property Development business and acquisitions for the 
Memorial Parks and Real Estate Investment businesses.

New reporting metrics
The Group's financial performance was impacted by the construction of units for the REIT JV, in 
which Calgro M3 has a 49% shareholding. This shareholding resulted in 49% of the development 
profit (construction and other services) being eliminated on consolidation as an unrealised 
profit, as prescribed by International Financial Reporting Standards ("IFRS"). This unrealised 
profit is carried on the balance sheet until realised in future financial years, once the units 
are completed, tenanted and the portfolio is revalued.

The impact of this unrealised profit on the financial performance and necessitated the institution 
of new metrics to measure operational performance between reporting periods. This further provides 
an indication of performance which is then consistent between periods. The three pertinent metrics 
are described as:
- Core earnings per share ("Core EPS") - Earnings per share before elimination of unrealised 
  profits from development of units for the REIT JV;
- Core headline earnings per share ("Core HEPS") - Headline earnings per share before elimination
  of unrealised profits from development of units for the REIT JV; and
- Core operating profit - Operating profit before elimination of unrealised profits from 
  development of units for the REIT JV.
  
We believe current core earnings and revenue growth, despite these challenges, are testament to 
the effectiveness and resilience of our strategy and proves that the variable operating model is 
efficient in uncertain times, as recently experienced during the financial year. Management of 
operational risks in each of the three businesses will continue to be a key focus for the 
management teams while at the same time investigating and executing on new opportunities to 
achieve the medium-term goal of equal profit contribution from each segment. We will, however, 
focus on maximising cash flows before investing in new opportunities.

As a Group we remain committed to methodically execute our overall strategy of shareholder 
wealth creation in the medium to long term and not on short-term gains and profit, while relying 
on the support and commitment of all our stakeholders - from Government and regulators to the 
individual communities in which we operate.

Operational review
Nasrec Memorial Park won the "Landscape Construction" and the "Landscape and Turf Maintenance" 
Water-Wise Awards at the 2017 South African Landscapers Institute Awards. The Group will continue 
to develop and implement water-saving initiatives throughout the project cycle.

Witpoortjie project won the Gauteng Govan Mbeki award for Best Affordable Project.

Integrated Residential Developments
During the year, 8 564 units and houses were under construction, of which 3 426 were completed 
and handed over to customers. Within the balance of 5 138, just over half are expected to be 
handed over before the end of July 2018. The Group has approximately 3 500 units already sold on 
which construction will commence as early in the 2019 financial year as possible. The total 
Residential Property Development pipeline consists of 54 376 opportunities with an unescalated 
revenue of R25.3 billion.

2 426 opportunities are currently being serviced that will bring the total number of serviced 
opportunities to in excess of 9 000. The Group is planning to commence infrastructure installation 
on an approximate 3 000 opportunities during the calendar year.

Current serviced opportunities available for development
Fleurhof                                           2 365                                                                                                        
South Hills                                        1 465                                                                                     
Jabulani                                             645
La Vie Nouvelle                                      103
Scottsdene                                           317
Belhar                                             2 387

Subsequent to the financial year-end, the Group experienced attempted land grabs at both the 
Fleurhof and Scottsdene projects, with some units being illegally occupied by the community and 
properties vandalised. The Group acted swiftly and secured both sites using private security. 
The Group is in the process of quantifying the damages suffered and has been engaging with its 
insurance companies to recover the losses suffered. In addition, the Group continues to engage 
and consult with local and provincial government to offer our assistance in searching for a 
sustainable and legal way to eradicate the housing shortage in an endeavour to ensure that all 
people can live in safe and dignified homes.

In the year under review South Hills was the largest contributor to revenue, surpassing Fleurhof 
as our flagship project. The Belhar and Scottsdene projects in Cape Town contributed 19.38% of 
revenue even through the slowdown due to the water crisis. Construction at our first project in 
KwaZulu-Natal will start during the first quarter of the new financial year, while commencement 
on the long-awaited Kwa Nobuhle project in the Eastern Cape is planned for later in the year.

The Group made a decision to discontinue the Leratong and Nelmapius projects due to a change in 
the risk profiles of these projects. Leratong was removed from the Group's pipeline towards the 
end of the 2018 financial year and Nelmapius was never included in the pipeline. The Group will 
reassess its position in this regard should the risk profile change.

In line with our risk mitigation strategy, the Group disposed of its 35% shareholding in the 
Otjomuise project in Namibia for R6 million when its risk profile also changed. Originally a 
project management/consulting project with limited human and financial capital exposure and 
limited  development risk, the project evolved into a complete development project with a far 
larger capital requirement and increased risk profile. In response to the risk assessments 
performed, it was concluded that resources could be deployed more efficiently on our own projects 
in South Africa and  the decision was taken to dispose of our shareholding in the joint venture 
for R6 million.

Calgro M3 remains well positioned to capitalise on the public sector's commitment to the mega and
catalytic projects initiative and remain ready to participate in these projects when roll out 
commences. With an increasing number of units being developed, the Group is able to capitalise on 
volume discounts and rebates together with enhanced negotiating power. The bulk of the increase in 
margin is being passed onto the consumer in the form of an enhanced product offering for the same 
sales price. Marketing remains a specific focus, with sales to the open market increasing by 16.7% 
from the previous year.

The primary areas of focus for the Residential Property Development business in the coming year 
will be to roll out the existing pipeline, capitalising on the private sector sales drive, 
enhancing the product offering, while at the same time remaining focused on efficiencies.

Memorial Parks
The Memorial Parks business continued its improved contribution to Group profit and even though 
small overall, growth prospects are exciting. A target of more than 10% contribution from Memorial 
Parks is set for the coming financial year. This rather ambitious target is supported by grave 
sales that are increasing month on month, coupled with ongoing improvements and advancements 
within the business.

                                                                                        Total cash
                                                                           Number         received
Nasrec Memorial Park                                                                 
- Graves sold 2018 financial year*                                            785     R9.0 million
- Graves sold in prior years                                                  449     R4.8 million

Fourways Memorial Park                                                               
- Graves sold 2018 financial year*                                            130     R5.9 million
- Other products                                                               32    
- Graves sold in prior years (since acquisition)                               48     R1.2 million

* Cash received from 232 graves at an average sales price of R16 594 (including VAT) have not been 
  accounted for yet due to being sold on deferred payment terms.

Our national roll-out plan is rapidly developing, supported through the acquisition of the 
Durbanville Memorial Park in Cape Town on 1 March 2018 and the Avalon Memorial Park in 
Bloemfontein, which will be effective 1 June 2018. The Eastern Cape and KwaZulu-Natal are targeted 
provinces for expansion, planned for later in the 2019 financial year or early in the 2020 
financial year.

Residential Rental Investments
Of the 3 852 units in the first tranche, 648 were completed and handed over to the Afhco Calgro M3
Consortium (the "Consortium") starting in November 2017. The remaining units will be handed over 
in a staggered manner over the coming months, with Belhar delayed due to the slowdown associated 
with the water challenges in Cape Town.

The Consortium is to target net property income yields in excess of 10.5% as well as a targeted 
rental escalation of  6% per annum that equates to a circa  20% return on equity in total (after 
gearing). No additional equity will be required by Calgro M3 for this initial investment, as the 
investment will be funded from value locked up in the Group balance sheet.

In line with our medium to long-term strategy, this sector was entered, to secure annuity revenue 
for use as operating cash. In addition to this, the Group benefits from bulk infrastructure 
created previously, rather than having to create infrastructure each time a development 
commences.

This strategy further assists Government in eradicating the housing backlog without exposing the 
Group to diminishing public sector spend.

In line with the diversification strategy, we have entered into our first non-Calgro M3 
acquisition in Ruimsig, Gauteng to the value of R402.4 million. A deposit of R78.6 million has 
been paid.

Financial review
The reported financial results for the year are best defined by two specific items, unrealised 
profit from the construction of units for the REIT JV as well as working capital requirements 
and constraints. When analysing the financial results for the year, readers are urged to take 
special note of the impact of these two items on the results and the inter-relatedness of 
their effects.

Statement of Comprehensive Income

R'000                                                         Movement %         2018         2017
Revenue                                                            12.09    1 742 602    1 554 680
Reversal of unrealised profit adjustment                                       88 012        1 176
Adjusted revenue                                                   17.66    1 830 614    1 555 856
Combined revenue                                                   16.71    2 322 494    1 989 921
Reversal of unrealised profit adjustment                                       88 012        1 176
Adjusted combined revenue                                          21.06    2 410 506    1 991 097
Operating profit                                                              149 926      228 965
Reversal of unrealised profit adjustment                                       88 012        1 176
Adjusted operating profit                                           3.39      237 938      230 141
Core earnings per share ("Core EPS")                                9.81       147.26       134.10
Core headline earnings per share ("Core HEPS")                      6.97       143.47       134.12
Return on equity                                                               10.99%       18.36%
Return on equity (including unrealised profit)                                 16.76%       18.42%
Unrealised profit                                              
Unrealised profit before tax                                                   88 012        1 176
Income tax at 28%                                                             (24 643)        (329)
Unrealised profit after tax                                                    63 369          847
Unrealised profit - share of profit of joint                                  
ventures and associates                                                         4 999          475
Total post tax profit reversal                                                 68 368        1 322

When comparing the full year results with the interim results for the period ended August 2017, a 
slowdown in revenue and combined revenue in the second six months is evident. The slowdown was due 
to a calculated decision by management to ensure the Group was not placed under undue working 
capital pressure while additional working capital funding was being secured. The Group set out to 
raise R550 million in May 2017 of which R350 million would be allocated to working capital and the 
balance to new opportunities and as a cash buffer. The capital raising process took a lot longer 
than initially anticipated and operations had to be slowed down to protect working capital. 
Revenue and combined revenue therefore grew at a slower pace in the second half of the year.

In November 2017 the first tranche of international funding was raised to the value of 
R278 million, from Societe De Promotion Et De Participation Pour La Cooperation Economique 
("Proparco") S.A, a subsidiary of Agence Francaise De Developpement ("AFD"). The balance of 
R109 million is due to be released in June/July 2018, once certain international environmental 
and health and safety compliance requirements are achieved.

The Group is in the final stages of securing an additional R200 million facility from a local 
funder which will complete the fundraising goal of R550 million. This funding, together with cash 
flow upside from operations, will sustain the Group's capital requirements in the short term.

We are pleased with the diversity of the contribution to combined revenue, with South Hills 
surpassing Fleurhof as the main contributor in the year under review. South Hills was responsible 
for 41.94% (2017: 19.0%) and Fleurhof for a contribution of 22.86% (2017: 36.1%). This is viewed 
as an extremely positive development that demonstrates the Group's ability to consistently and 
sustainably deliver on these large-scale integrated projects.

Memorial Parks contributed 5.14% (2017: 0%) to overall Group profit. With a target of equal profit
contribution from all three businesses in the medium term, the Group views Memorial Parks as a 
high-growth area. A substantial amount of emphasis will be placed on growing this business in the 
next financial year to achieve our internal target of a contribution in excess of 10% of Group 
profit.

Basic earnings per share ("EPS") decreased by 29.42% to 93.91 cps (2017: 133.06 cps). Similarly, 
headline earnings per share ("HEPS") decreased by 32.28% to 90.12 cps (2017: 133.08 cps). The new 
metrics which provide additional information on the Group's performance, core earnings per share 
("Core EPS"), increased by 9.81% to 147.26 cps (2017: 134.10 cps), as well as core headline 
earnings per share ("Core HEPS"), which increased by 6.97% to 143.47 cps (2017: 134.12 cps).

R'000                                                                            2018         2017
Gross profit % reconciliation                                                            
Gross profit                                                                  270 089      334 163
Reversal of unrealised profit adjustment                                       88 012        1 176
Adjusted gross profit                                                         358 101      335 339
Gross profit (%)                                                               15.50%       21.49%
Adjusted gross profit (%)                                                      19.56%       21.55%

The gross profit margin of 15.50% is lower than the gross margin of 21.49% reported in 
February 2017. Once unrealised profit is added back, the adjusted margin settles at 19.56%, which 
more closely aligns to the target range of 20% to 25%. The adjusted margin is expected to increase 
towards the target range once all rebates and volume discounts are secured from suppliers on the 
back of higher volumes from construction of units for the REIT JV and the private sector. This is 
already evidenced from the 17.14% gross profit margin reported in August 2017.

In the current year administrative expenses increased by 11.58% with the bulk of the increase 
attributable to marketing-related expenses, technology expenses, corporate social investments, 
staff increases and various professional consultants.

The increase in finance income is primarily attributable to increased operations at the South Hills 
and Witpoortjie projects and an increase in shareholder loans to the Tanganani project, which are 
all accounted for as joint ventures (JVs) within the Group. These increased operations resulted in 
increased loan and debtor account balances on which finance income is earned. These increased 
operations resulted in a 52.5% increase in the share of profits of joint ventures and associates 
to R9.6 million (2017: R6.3 million).

Statement of Financial Position

R'000                                                         Movement %         2018         2017
Working capital invested (inventory, construction                                       
contracts, trade and other receivables)                            18.32    2 669 111    2 255 835
Cash and cash equivalents                                         (34.91)     156 723      240 765
Borrowings                                                         55.62      889 597      571 646
Net debt to equity ratio*                                                        0.75         0.42
Covenant (target below covenant)                                                  1.5          1.5
Debt service cover ratio ("DSCR")*                                               1.57         1.83
Covenant (target above covenant)                                                  1.2          N/A
Current ratio                                                                    1.75         1.79

* Please refer to note 3 for definition and calculation.

Construction contracts increased during the year, reflecting the increased construction and 
development of units for the REIT JV, as well as for the private sector not yet handed over. The 
construction contracts balance is estimated to be at its peak, for units for the REIT JV (to which 
the bulk of the increase is attributable). Total construction contracts balance at year-end, 
attributable to the construction of units for the REIT JV, is R392.3 million.

Construction of these units had a negative impact on cash generated from operations as all capital 
is required to be invested until the units are completed. The units will be handed over on a 
staggered basis over the next six months and this will free up working capital.

Even though net movements in inventory were minimal, they bear mentioning. Of the balance of
R554.4 million (2017: R596.0 million), R130.7 million (2017: R120.2 million) is attributable to 
Memorial Parks. A further R116 million was transferred from inventory to construction contracts 
during the year as construction began on Jabulani Parcel C and K units and R27.9 million was spent 
on the La Vie Nouvelle frail-care building.

In addition, the Group secured new properties in Vredehoek in the Western Cape, and at Bridge City 
and Umhlanga Hills in KwaZulu-Natal - all with a focus on the private sector and with bulk 
infrastructure already in place. The properties were acquired on structured payment arrangements 
with minimal upfront capital investment.

The acquisition of the Durbanville Memorial Park was completed after year-end, with Calgro M3 
obtaining effective control from 1 March 2018 for an amount of R18 million (payable on a 
structured basis). Included in the acquisition is a fully registered non-profit organisation 
("NPO") worth in excess of R10 million which will be responsible for the Memorial Parks 
maintenance fund of the Group going forward. Cash balances at year-end settled at R156.7 million 
(2017: R240.8 million) and are expected to strengthen as more REIT JV and private sector units 
are completed and handed over and as additional working capital is raised.

The net debt to equity ratio has increased to 0.75 (2017: 0.42). These gearing levels remain 
comfortably within the covenant ratio of 1.5 and our own internal tolerance level of 1.2. The 
gearing levels are expected to rise to a level closer to 1:1 as more working and investment 
capital is secured to fund the increased focus on the private sector as well as the acquisition 
of new opportunities. The Group's weighted average cost of debt is currently at 11.11%.

Cash flow
Cash flow from operations came under pressure during the year due to the increased construction 
of REIT JV and private sector units. Cash generated from operations is expected to improve in the 
next six months as more units are handed over. If the investment into the REIT JV is eliminated 
in the current year, the cash flow from operations would have illustrated the following cash 
generated from operations:

R'000                                                                                         2018
Cash generated from operations                                                            (205 839)
Total investment into REIT JV units at year-end                                            392 260
Adjusted cash generated from operations excluding REIT JV units                            186 421

At 28 February 2018, the estimated cash flow upside on completion of all the first 
phase (3 852 units) REIT units, after the deduction of our equity contribution is 
illustrated below:            

R'000                                                                                         2018
Total cost to complete units                                                              (338 665)
Total funds to be received on completion                                                 1 162 334
Less: Deposit                                                                             (177 027)
                                                                                           646 642
Less: Equity contribution to the REIT JV                                                  (384 451)
Total cash upside upon completion to be used for future working capital                    262 191

During the year, the Group invested very little into new infrastructure in an effort not to place 
additional pressure on working capital. With cash flow stabilising, the Group commenced with 
infrastructure installation on 2 426 opportunities close to year-end and is expected to commence 
on a further approximate 3 000 opportunities as the year progresses, to ensure future growth.

The first investment of R102.3 million into the Afhco Calgro M3 Consortium was made towards the 
end of the current financial year with a further R384.5 million expected in the next six months 
with no additional cash flow requirement.

Segmental report changes
The appointed Chief Operating Decision Maker ("CODM") within the Calgro M3 Group is the Group's
Executive Committee (Exco). It is Exco's responsibility to meet on a regular basis and determine 
strategy for the Group, set and review budgets, allocate Group resources to the operating segments 
and assess the performance of the operating segments.

The CODM manages the Group activities in three distinct segments, namely:
- Integrated Residential Developments - which consists of the following activities: infrastructure
  development; marketing and sales; construction; and handover to client;
- Memorial Parks; and
- Residential Rental Investments.

As a result of the strategic redesign of the Group's business, the CODM has changed its assessment 
of the performance and allocation of resources to align with the Group's current and strategic 
goals. 

The segmental representation has changed from the previously reported segments of:  Residential 
Property Developments, Memorial Parks, and Professional Services. As a result, the prior year 
numbers have been restated to reflect the change.

Empowerment
Transformation goes beyond compliance with legislation and regulation. Our goal is to create a 
truly transformed organisation where people are empowered to fulfil their purpose. We acknowledge 
that the broader transformation of society cannot take place unless large companies like Calgro M3 
play a major part. We are proud to announce that Calgro M3 is a recognised level 1 contributor 
(2017: Level 4 contributor).

Strategy and prospects
Our strategy is to enable the extraction of multiple sources of revenue and profits from 
businesses and opportunities along the turnkey property development value chain, which will result 
in an improved operating margin blend and the creation of annuity income.

This strategy can only be achieved if the capital base grows annually by capitalising profits 
rather than paying dividends and continuing to gear profits. The optimal application of capital 
between new opportunities, working capital and risk capital will remain an important strategic 
decision as capital allocation across this horizontal value chain is made.

Investment into opportunities that deliver annuity income is a strong element of strategic focus 
for the Group. The medium-term goal is to:
- Increase exposure in the residential rental market;
- Develop insurance-related products for the Memorial Parks business by partnering with insurance
  specialists; and
- Identify and invest in new business opportunities able to deliver annuity income.

Residential Property Development pipeline of R25.3 billion with a targeted ROE of 30%.
                                                                                                
Memorial Parks pipeline increasing to R2.2 billion with a targeted ROE > 30%.

Real Estate Investment("REIT") with a targeted ROE of 20.5%(annual rental yield plus revaluation 
growth) on an estimated Group equity investment of R4 billion.
  
Current share price levels are estimated to be at a discount to management valuation. Refer to 
the integrated annual report for a detailed analysis of the management valuation and metrics 
applied as well as the notice of AGM.

Health, safety and environmental initiatives
Calgro M3 remains committed to health and safety standards of the highest level as well as 
minimising the negative impact of any operations on the environment.

The Group is currently on a renewed drive to enhance the policies and procedures that govern 
health and safety across operations as well as the environmental impact. The development and 
enforcement of these policies and procedures are being undertaken by a newly appointed Health 
and Safety Manager and an Environmental Manager, together with support from external experts.

The Group is extremely proud to announce that 2018 was again fatality free.

Board of Directors
It was with great sadness that we announced the passing of Mr Hugh Cameron, an Independent 
Non-Executive Board member and Chairperson of the Audit and Risk Committee on 6 April after a 
short illness.

Hugh served on the Calgro M3 Board from 8 May 2015 and fulfilled his roles with enthusiasm, 
dedication and distinction, making an immeasurable contribution to the Company. Our 
condolences are extended to his wife, children, grandchildren, family and friends.

Calgro M3 has begun the process of identifying and nominating an appropriate replacement and
shareholders will be informed accordingly.

Strengthening of operational management
We continue to assess the quality of leadership and management to ensure that we have strong 
leaders, able to think strategically and execute efficiently. We are pleased to report that 
Manda Nkuhlu, who joined the Board as an Executive Director in 2017, is now operating as the 
Managing Director for the Residential Property Development business and is assisted by 
Deon Steyn, Derek Steyn, Urvash Kissoon Singh and Allistiar Langson.

Annual report and notice of annual general meeting
The Company's integrated annual report containing the audited annual financial statements for 
the year ended 28 February 2018, and the notice of the annual general meeting are available 
on the Company's website hosted at http://www.calgrom3.com. It will be posted to shareholders on or 
about 28 May 2018.

Appreciation
None of our achievements would be possible without our clients. We continually strive to 
assist clients to fulfil their needs and thank them for their continued support of the Calgro M3 
brand and the spectrum of products and services. We further rely on support and commitment from 
all our stakeholders and shareholders - from government and regulators to the individual 
communities in which we operate.

We would also like to thank the management team for their commitment and drive, and to extend 
our gratitude to the Calgro M3 Board and employees. Our team has an unchanged focus of achieving 
a 30% return on equity and will continue to work to achieve this.

Our ultimate goal of becoming the provider of choice in all our markets is within our reach and 
we once again renew our commitment to Build Legacies and Changing Lives.

Wikus Lategan                                Waldi Joubert
Chief Executive Officer                      Financial Director

Johannesburg
14 May 2018

Summarised Consolidated Statement of Comprehensive Income

                                                                            Audited        Audited
                                                                         year ended     year ended
                                                                        28 February    28 February
R'000                                                                          2018           2017
Revenue                                                                   1 742 602      1 554 680
Cost of sales                                                            (1 472 513)    (1 220 517)
Gross profit                                                                270 089        334 163
Other income                                                                 12 922         16 600
Other expenses                                                               (1 310)        (3 700)
Administrative expenses                                                    (131 775)      (118 098)
Operating profit                                                            149 926        228 965
Finance income                                                               28 957         19 994
Finance cost                                                                (16 687)       (21 919)
Share of profit of joint ventures and associates - net of tax                 9 560          6 269
Profit before tax                                                           171 756        233 309
Taxation                                                                    (50 949)       (63 176)
Profit after taxation                                                       120 807        170 133
Profit after taxation and other comprehensive income                                   
attributable to:                                                                       
- Owners of the parent                                                      120 351        169 156
- Non-controlling interests                                                     456            977
                                                                            120 807        170 133
Profit after taxation attributable to:                                                 
Equity holders of the company                                               120 351        169 156
Earnings per share - cents                                                    93.91         133.06
Fully diluted earnings per share - cents                                      92.00         129.00

Earnings Reconciliation
                                                                            Audited        Audited
                                                                         year ended     year ended
                                                                        28 February    28 February
R'000                                                                          2018           2017
Determination of headline and diluted earnings                                        
Attributable profit                                                         120 351        169 156
(Profit)/loss on disposal of property                                          (170)            25
Gain on deemed disposal of interest in joint venture                         (6 000)             -
Impairment of goodwill                                                        1 310              -
Headline and diluted headline earnings                                      115 491        169 181
Determination of earnings and diluted earnings                                        
Attributable profit                                                         120 351        169 156
Earnings and diluted earnings                                               120 351        169 156
Number of ordinary shares ('000)                                            128 150        128 150
Weighted average shares ('000)                                              128 150        127 126
Headline earnings per share - cents                                           90.12         133.08
Fully diluted headline earnings per share - cents                             88.29         129.02
Fully diluted weighted average shares ('000)                                130 813        131 127

Summarised Consolidated Statement of Financial Position

                                                                            Audited        Audited
                                                                         year ended     year ended
                                                                        28 February    28 February
R'000                                                                          2018           2017
ASSETS                                                                
Non-current assets                                                    
Investment Property                                                           8 879          6 519
Property, plant and equipment                                                 6 163          5 806
Intangible assets                                                           159 664        159 690
Investment in joint ventures and associates                                  41 909         12 349
Deferred income tax asset                                                    23 999         14 847
                                                                            240 614        199 211
Current assets                                                        
Loans to joint ventures and associates                                      143 422         26 451
Inventories                                                                 554 397        595 990
Construction contracts and work in progress                               1 820 974      1 387 537
Trade and other receivables                                                 293 739        276 198
Current tax receivable                                                       16 600         18 603
Cash and cash equivalents                                                   156 723        240 765
                                                                          2 985 855      2 545 544
Total assets                                                              3 226 469      2 744 755
EQUITY AND LIABILITIES                                                
Equity                                                                
Stated capital                                                              116 256        116 256
Share-based payment reserve                                                  74 056         60 847
Retained income                                                             977 015        846 079
                                                                          1 167 327      1 023 182
Non-controlling interests                                                       355           (101)
Total equity                                                              1 167 682      1 023 081
LIABILITIES                                                           
Non-current liabilities                                               
Deferred income tax liability                                               354 283        302 358
                                                                            354 283        302 358
Current liabilities                                                   
Borrowings                                                                  889 597        571 646
Other current liabilities                                                   814 907        847 670
                                                                          1 704 504      1 419 316
Total liabilities                                                         2 058 787      1 721 674
Total equity and liabilities                                              3 226 469      2 744 755
Net asset value per share - cents                                            911.18         798.35
Net tangible asset value per share - cents                                   786.59         673.73

Summarised Consolidated Statement of Cash Flows
                                                                            Audited        Audited
                                                                         year ended     year ended
                                                                        28 February    28 February
R'000                                                                          2018           2017
Cash (utilised in)/generated from operating activities                                
Cash (utilised in)/generated from operations                               (205 838)       292 068
Finance income received                                                       6 686         16 727
Finance cost paid                                                           (75 747)       (63 167)
Tax paid                                                                     (1 478)        (7 444)
Net cash (utilised in)/generated from operating activities                 (276 377)       238 184
Cash flows invested in investing activities                                           

Purchase of investment property                                              (2 360)             -
Purchase of property plant and equipment                                     (1 579)          (867)
Purchase of intangible assets                                                    (7)           (52)
Proceeds on disposals of property plant and equipment                           243              -
Increase in Investments in JV/Associate                                     (10 000)             -
Acquisition of business                                                      (2 500)        (4 500)
Acquisition of subsidiary                                                        51        (93 000)
Loans advanced to joint ventures and associates                            (113 381)       (18 472)
Net cash invested in investing activities                                  (129 533)      (116 891)
Cash flows from financing activities                                                  

Proceeds of borrowings                                                      516 000        239 809
Repayment of borrowings                                                    (192 000)      (206 915)
Equity (paid back)/received in advance*                                      (2 132)         6 507
Net cash from financing activities                                          321 868         39 401
Net (decrease)/increase in cash and cash equivalents                        (84 042)       160 694
Cash and cash equivalents at the beginning of the year                      240 765         80 071
Cash and cash equivalents at end of the year                                156 723        240 765

* This relates to cash paid back and received for the subscription of shares issued under the 
  Calgro M3 Executive Share Scheme.
  
Summarised Consolidated Statement of Changes in Equity

                                            Share-
                                             based                                Non-   
                                 Stated    payment    Retained             controlling       Total
R'000                           capital    reserve      income      Total    interests      equity
Balance at 1 March 2016          96 022     47 922     676 923    820 867       (1 078)    819 789
Share-based payment/                                                                     
reserve movement                 20 234     12 925           -     33 159            -      33 159
Total comprehensive                                                                      
income for the year ended                                                                
28 February 2017                      -          -     169 156    169 156          977     170 133
Balance at 1 March 2017         116 256     60 847     846 079  1 023 182         (101)  1 023 081
Share-based payment/                                                                     
reserve movement                      -     23 794           -     23 794            -      23 794
Cancellation of executive                                                                
share scheme participant              -    (10 585)     10 585          -            -           -
Total comprehensive                                                                      
income for the year ended                                                                
28 February 2018                      -          -     120 351    120 351          456     120 807
Balance at 28 February 2018     116 256     74 056     977 015  1 167 327          355   1 167 682

Summarised Segment Report for the Group

                                Residential                Residential        Holding
February 2018                      Property    Memorial         Rental        Company/
R'000                           Development       Parks     Investment    unallocated*       Total
Total segment revenue             1 729 998      12 604              -              -    1 742 602
Revenue from joint                            
ventures and associates             579 892           -              -              -      579 892
Combined revenue                  2 309 890      12 604              -              -    2 322 494
Operating profit                    148 554       5 712              -         (4 340)     149 926
Finance income                       28 922          28              -              7       28 957
Finance costs                       (15 587)     (1 100)             -              -      (16 687)
Share of profit/(loss) of                     
associate/joint venture               9 052           -            508              -        9 560
Adjusted profit before tax          170 941       4 640            508         (4 333)     171 756
Profit after taxation               118 677       6 215            508         (4 593)     120 807
ASSETS                                        
Non-current assets                            
Investment property                       -       8 879              -              -        8 879
Property, plant and                                                
equipment                             3 608       2 555              -              -        6 163
Intangible assets                   158 969         695              -              -      159 664
Investment in joint ventures                  
and associates                       41 401           -            508              -       41 909
Deferred income tax asset            22 043       1 290            666              -       23 999
                                    226 021      13 419          1 174              -      240 614
Current assets                                
Loans to joint ventures                       
and associates                       41 092           -        120 330              -      143 422
Inventories                         423 642     130 755              -              -      554 397
Current tax receivable               16 484          32              -             84       16 600
Construction contracts            1 820 974           -              -              -    1 820 974
Trade and other                               
receivables                         287 783       5 482            451             23      293 739
Cash and cash equivalents           152 898       2 825              -          1 000      156 723
                                  2 742 873     139 094        102 781          1 107    2 985 855
Total assets                      2 968 893     152 513        103 955          1 107    3 226 469

                                Residential                Residential        Holding
February 2018                      Property    Memorial         Rental        Company/
R'000                           Development       Parks     Investment    unallocated*       Total
LIABILITIES
Non-current liabilities
Deferred income tax                            
liability                           354 283           -              -             -       354 283
                                    354 283           -              -             -       354 283
Current liabilities                                               
Borrowings                          271 426           -              -        618 170      889 597
Loans from group                                                  
companies                                 -           -              -             -             -
Current income tax                                                
liabilities                              23           -              -             -            23
Trade and other payables            787 199      25 947              -         1 738       814 884
                                  1 058 648      25 947              -       619 908     1 704 504
Total liabilities                 1 412 931      25 947              -       619 908     2 058 787

* The group operates a central treasury function across all business segments. The Bond exchange 
  borrowings cannot be allocated to specific segment and as such is included as unallocated due to 
  it being utilised across the segments. Funding raised from Proparco during the year was 
  specifically raised for the Residential property development segment and allocated as such.
  
Any items that are not allocatable to specific segments are indicated as Holding 
Company/unallocated.

                                Residential                Residential       Holding
February 2017                      Property    Memorial         Rental       Company/
R'000                           Development       Parks     Investment   unallocated*        Total
Segment revenue                   1 550 363       4 317              -             -     1 554 680
Revenue from joint
ventures and associates             435 241           -              -             -       435 241
Combined revenue                  1 985 604       4 317              -             -     1 989 921
Operating profit                    230 593       1 210              -        (2 838)      228 965
Finance income                       19 977          10              -             8        19 995
Finance costs                       (21 263)       (656)             -             -       (21 919)
Share of profit/(loss) of
associate/joint venture               6 269           -              -             -         6 269
Adjusted profit before tax          235 576         564              -        (2 830)      233 310
Profit after taxation               173 952        (241)             -        (3 578)      170 133
ASSETS
Non-current assets
Investment property                       -       6 519              -             -         6 519
Property, plant and                                                                       
equipment                             3 401       2 405              -             -         5 806
Intangible assets                   158 995         695              -             -       159 690
Investment in joint ventures                                       
and associates                       12 349           -              -             -        12 349
Deferred income tax asset            13 977         870              -             -        14 847
                                    188 722      10 489              -             -       199 211
Current assets
Loans to joint ventures
and associates                       26 451           -              -             -        26 451
Inventories                         475 764     120 226              -             -       595 990
Current tax receivable               18 443           -              -           160        18 603
Construction contracts            1 383 647           -              -             -     1 383 647
Work in progress                      3 890           -              -             -         3 890
Trade and other                                                  
receivables                         275 841         138              -           219       276 198
Cash and cash equivalents           239 563       1 192              -            10       240 765
                                  2 423 599     121 556              -           389     2 545 544
Total assets                      2 612 321     132 045              -           389     2 744 755
LIABILITIES
Non-current liabilities
Deferred income tax
liability                           302 358           -              -             -       302 358
                                    302 358           -              -             -       302 358
Current liabilities                                               
Borrowings                                -           -              -       571 646       571 646
Current income tax                                                
liabilities                               2           7              -             -             9
Trade and other payables            823 514      23 044              -         1 103       847 661
                                    823 516      23 051              -       572 749     1 419 316
Total liabilities                 1 125 874      23 051              -       572 749     1 721 674

* The group operates a central treasury function across all business segments. The Bond exchange 
  borrowings cannot be allocated to a specific segment and as such is included as unallocated due 
  to it being utilised across the segments.

Any items that are not allocatable to specific segments are indicated as Holding 
Company/unallocated.

Related party transactions
                                                                            Audited        Audited
                                                                         year ended     year ended
                                                                        28 February    28 February
R'000                                                                          2018           2017
Compensation paid to key employees and personnel                             34 409         60 894
Finance income from related parties                                          15 791         10 368
Contract revenue received from joint ventures                               485 166        203 119
Services fees received from joint ventures                                        -         10 843


Notes
1.  Basis of preparation
    The summarised consolidated financial statements are prepared in accordance with the 
    requirements of the JSE Limited Listings Requirements for abridged reports and the 
    requirements of the Companies Act applicable to summary financial statements. The Listings 
    Requirements require abridged reports 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 summary 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 were internally compiled by UK Kissoon Singh CA(SA) and
    M Esterhuizen CA(SA) under the supervision of WA Joubert CA(SA) and were approved by the Board
    on 11 May 2018.

    This summarised report is extracted from audited information, but is not itself 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 abridged report that 
    the financial information has been correctly extracted from the underlying annual financial 
    statements.

2.  Dividends
    Management believes that cash should be retained to fund growth within the Group. Cash 
    retention is important to ensure investment into future projects and businesses. The Board has 
    therefore resolved not to declare a dividend for this financial year.

3.  Ratio calculations
    Net debt/equity ratio
    This ratio is calculated as net debt divided by equity. Net debt is calculated as total 
    interest bearing borrowings less cash and cash equivalents. Equity is calculated as the total 
    equity per the statement of financial position (excluding share-based payment reserve).

    R'000                                                                      2018           2017
    Net debt                                                                             
    Borrowings                                                              889 597        571 646
    Other Interest bearing borrowings                                        88 408         71 599
    Less: Cash and cash equivalents                                        (156 723)      (240 765)
                                                                            821 282        402 480
    Equity                                                                               
    Stated capital                                                          116 256        116 256
    Retained income                                                         977 015        846 079
                                                                          1 093 271        962 335
    Net debt/equity ratio                                                      0.75           0.42

    Proparco requirements
    The Group monitors capital from Proparco on the basis of its Debt Service Cover Ratio and its 
    Net Debt/Equity Ratio (as above). The minimum allowed debt service cover ratio for the Group 
    is 1.2 and the net debt/equity ratio of below 1.5:1.

    Debt Service Cover Ratio ("DSCR")
    This ratio is calculated as available cash flow divided by debt service requirement. Available 
    cash flow is calculated as net cash generated from operating activities plus new financial 
    indebtedness incurred plus cash and cash equivalent at the beginning of the year plus capital 
    expenditure (including investments into associates and joint ventures). Debt service 
    requirement is calculated as Interest and fees plus Principal repayments.

    R'000                                                                      2018           2017
    Available cash flow
    Net cash generated from operating activities                           (205 839)       292 068
    New financial indebtedness incurred                                     516 000        239 809
    Cash and cash equivalent BoY                                            240 765         80 071
    Capital expenditure                                                    (129 532)      (116 890)
                                                                            421 394        495 058
    Debt service requirement
    Interests and fees                                                      (75 747)       (63 167)
    Principal repayments                                                   (192 000)      (206 915)
                                                                           (267 747)      (270 082)
    Debt Service Cover Ratio ("DSCR")                                          1.57           1.83

Directors                                                                                             
PF Radebe (Chairperson)*#                                                                             
WJ Lategan (Chief Executive Officer)                                                                  
FJ Steyn                                                                                              
WA Joubert (Financial Director)                                                                       
W Williams                                                                                            
VJ Klein*#
H Ntene*#
RB Patmore*#                                                                                          
ME Gama*#                                                                                             
BP Malherbe*
Auditors
MN Nkuhlu
HC Cameron*# (passed away on 6 April 2018)

* Non-executive # Independent

Registered office
Calgro M3
Ballywoods Office Park
33 Ballyclare Drive
Bryanston
2196
Private Bag X33, Craighall, 2024

Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers 
15 Biermann Avenue
Rosebank
2196

PO Box 61051, Marshalltown, 2107

Sponsor
Grindrod Bank Limited

Auditors
PricewaterhouseCoopers Inc.

http://www.calgrom3.com

Disclaimer: Statements contained in this announcement regarding the prospects of the Group have not 
been reviewed or audited by the Group's external auditors.

Date: 14/05/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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