Calgro M3, the affordable housing and memorial parks developer, says “sticking to its knitting” resulted in a revenue increase in a challenging economic environment.
For the six months to end-August, revenue rose 13.5% to R688.9m, driven mainly by the residential property development business.
“Though we sold fewer units during the reporting period, on average, sales prices are higher,” CEO Wikus Lategan told Business Day.
Lategan said the average sale price is just more than R600,000 when including sales of freehold properties priced from R800,000-R1m. At the bottom end, the average sale price is about R580,000.
“Despite consumers being under pressure, our value for money offering is what keeps our business strong and growing — banks are still lending up to 100% for properties in the affordable segment.”
Lategan said that for below R500,000 buyers have access to modern lifestyle properties in secure environments.
Calgro serves a broad market ranging from fully subsidised to bonded homes, enabling the company to adapt and reposition construction activities in response to economic shifts.
The group aims to maintain a well-balanced mix of units including those ready for sale, and those with granted bonds, awaiting transfer and under construction.
Its residential property development business with eight projects in Gauteng and the Western Cape account for 97% of total revenue.
The group handed over 949 houses, down from 1,193 in August 2022, with 2,118 houses under construction — more than 50% of these will be ready in February 2024.
Lategan said the group has a revenue pipeline of R15bn representing 22,357 houses.
“We intentionally limited our growth given market conditions and we expect to develop 3,000-4,000 homes annually.”
He said the group will grow without adding new projects. In this time, infrastructure will have been installed in all active projects helping to reduce operational costs.
This excludes Frankenwald next to Alexandra and Marlboro Gautrain station in Johannesburg. Frankenwald is expected to break ground in mid-2024 and will yield 20,000-30,000 houses.
Lategan said available electricity supply and infrastructure for the commencement phases reduce initial capital needs, easing the Frankenwald project’s cash flow strain, which will result in improved margins.
“Frankenwald will bring Calgro M3’s lifestyle offerings and value for money to the doorstep of Sandton on a significant scale,” he said.
Lategan said infrastructure investments drive business growth and sustainability. The company services land on which to develop, without waiting for government assistance.
“Infrastructure is critical to job creation and skills transfer but it also enables the development of decent affordable housing for many people.”
The group has a strong balance sheet with cash from operations of R89.8m and profit of R84.8m. Administrative costs increased from R41.1m to R49.9m due to increased professional and consulting fees, as well as advertising spend.
Calgro repurchased 22.6-million of its issued shares at an average price of R2.63 — decreasing the issued floated number of shares to 98.8-million.
Headline earnings per share rose from 57c to 78.88c.
No interim dividend was declared as management opted to hold onto the money to fund possible growth as well as reduce debt and interest.
Update: October 16 2023
This article has been updated with new information from Calgro CEO Wikus Lategan.
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