A slowdown in infrastructure investment in the lead-up to municipal elections and community unrest at various projects, paired with the construction of units sold to the private sector only starting towards the end of the reporting period, saw property developer Calgro M3 post flat interim earnings on Monday.

For the six months ended August 31, Calgro realised basic earnings a share of 65.11c – 1.72% lower than the comparative period of 2015 – and headline earnings a share of 65.13c apiece – 1.69% lower than for the first half of 2015.

Combined revenue also decreased by 9.9% to R922.7-million, but with its Fleurhof operations now accounting as a subsidiary and no longer as a joint venture, the company saw an 11.4% increase in its earnings before interest and taxes to R119.6-million, with group revenue up 25.7% to R720.2-million.

Meanwhile, inventory and construction contracts increased by R137.8-million over the period, reflecting that investment into infrastructure and new projects was constrained.

During the period, 4 542 houses were under construction, of which 1 272 have been handed over to owners. An additional 5 239 opportunities are being serviced of which the majority were started post the municipal elections.

On completion of these services, just over 10 000 serviced opportunities will be available for future construction.

Further, the company points out that with government remaining committed to the roll-out of catalytic and megahousing projects, Calgro is well positioned to benefit from this when spending normalises.

At a presentation of the company’s results, in Johannesburg, on Monday MD Wikus Lategan added that government could not eradictate the housing shortfalls, currently estimated to be about 2.1-million in subsidised opportunities, by itself. “We really want to play our role,” he added.

Lategan further explained that the group’s strategy to diversify within residential market sectors, through the establishment of a real estate investment trust with SA Corporate Real Estate, would further benefit its earnings.

“We will always have the underlying theme of property development, but through diversification, we will be able to play both sides [of the property market],” he said, noting that when the interest rate goes up, Calgro will have a failsafe, and when it falls, the company will be able to buy more houses and expand its portfolio.

The company is planning to increase its portfolio from R10-billion to R15-billion.

BOARD CHANGES
CEO Ben Malherbe will step down on February 28, 2017, and will be appointed nonexecutive director with effect March 1, 2017.

Lategan will succeed Malherbe as CEO.

Lategan was appointed FD in August 2008, and was promoted to MD on June 1, 2015. The position of MD was created as part of the succession plan and will now fall away.