Affordable housing and memorial parks developer Calgro M3 says the pipeline for its residential property development business will yield R15.9bn in revenue. This excludes the Frankenwald development near Sandton, which is expected to come on stream in mid-2023.
The residential property development segment generates the bulk of Calgro M3’s revenue with 96.7%, and the rest comes from memorial parks. Fleurhof in Johannesburg is its flagship project, bringing in 48.2% of total revenue.
For the next five years, the group has a residential development pipeline of about 24,000 units scheduled for completion at various stages.
Some of the projects include Belhar CBD, Fleurhof, Jabulani Precinct, La Vie Novelle, Scottsdene, Maitland, South Hills and KwaNobuhle.
“We are confident of growing revenue income in this business because our value offering is unmatched in the market,” CEO Wikus Lategan told Business Day.
He said the group’s developments are affordable across various income groups, and their secure lifestyle nature makes them appealing for buyers.
Calgro develops and sells residential units, with prices starting from R499,000, with about R600,000 being the sweet spot, while prices can go up to R1.2m for free-standing homes.
Calgro M3 specialises in integrated residential developments including subsidised, social housing and Grassroots Affordable People’s (GAP) housing.
Lategan said their focus is on developing residential properties in Gauteng, mostly in Johannesburg and surrounds, and the Western Cape — Cape Town and surrounding areas.
The group has nine projects, one of which is Bridge City in KwaZulu-Natal. Lategan said it is a difficult area to operate in hence the focus will be on Gauteng and the Western Cape.
For the six months to end-August, the group had 3,965 residential units under construction, with about half of these expected to be completed or handed over before February 2023.
The group completed 1,193 units in the first six months of the year and 2,685 for the 12-month period ended February 2022. Lategan said they aim to deliver about 4,000 to 6,000 units annually.
“We are well positioned, sufficiently capitalised and have liquidity to address market demand and continued growth,” he said.
Though the residential property development segment saw revenue lift, the memorial parks side took a knock.
“This business experienced a slowdown in sales in the period under review, attributable to three factors — lower burial volumes, affordability and the restructuring of the sales and marketing department,” Lategan said.
Higher vaccination rates, less lethal Covid-19 variants and stricter hygiene practices have reduced the number of deaths and consequently burials resulting in slow sales during the review period.
Memorial parks such as Fourways and Durbanville which predominantly sell family estates have seen a significant slowdown in reservations.
As an example, a normal grave at Nasrec Memorial Park sells for about R13,500, while family estates at parks such as Fourways can cost as much as R300,000 or more.
Lategan said affordability continues to be a challenge especially in a rising interest rate environment. To mitigate against this, the group has implemented a lay-by offering where customers can pay for graves over a 24-month period at zero interest.
He said this offering was introduced in mid-July at Nasrec Memorial Park and was rolled out to Fourways and Durbanville at the end of August, resulting in R2.9m in signed deals so far.
Lategan said these numbers would be reflected in the next review period once all payments are received and sale transactions completed.
“The current operating climate is not easy, but our knowledge of the industry, coupled with meticulous capital allocation to high-yielding projects, enhancing products and lifestyle offerings while taking affordability into account, will be at the forefront of management’s strategic objectives for the foreseeable future,” he said.
During the reporting period, headline earnings, a widely used measure of profit that strips out impairments and one-off items, increased 33.2% to R69.2m.
“This first half of the financial year was really a period during which we ensured that sufficient serviced opportunities and the necessary future infrastructure are in place to support sales and strong cash generation,” said Lategan.
The revenue of the company, valued at R428m on the JSE, is up 5.4% to R607.1m. Gross profit margin increased 2.3 percentage points to 22% and profit for the period jumped 44.7% year on year to R69.3m
Net debt is up 15.8% to R778.5m while equity advanced 7.7% to R1.03bn. No dividend was declared.
Correction: October 19 2022
An earlier version of the article incorrectly said the group has nine projects under way in KwaZulu-Natal. It has a total of nine projects, one of which is Bridge City in KwaZulu-Natal.
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