Calgro positioned for growth after Covid-related loss


Calgro positioned for growth after Covid-related loss

Published Date: 2020-10-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Calgro positioned for growth after Covid-related loss

The housing developer has streamlined its business and says it is positioned for a return to profitability once conditions normalise.

Calgro M3 has toppled into a loss after the Covid-19 lockdown hampered construction of its residential properties. However, it says its Memorial Parks business cushioned the fall.

The company said no construction took place in its Residential Property Development business for two months due to the pandemic. However, it still incurred once-off Covid-19 costs to ensure future sustainability and liquidity. Combined with the associated standing time, these amounted to R35.8 million. The costs associated with the closure of its construction division added another R12.9 million.

Over the period, it concluded restructuring initiatives, including shutting down its internal construction division which it said would result in a slight additional contribution to margin in the future. The leaner business, together with little pressure to invest in capital intensive projects over the short term and more liquidity, had positioned to to deliver stronger results once trading conditions normalised, it said.

Calgro said the Memorial Parks division acted acted as a risk diversifier against the traditional lumpy and cash intensive Residential Property Development business, increasing first-half cash revenue by 66% to R25.8 million and accounting revenue by 75% to R19.3 million.

Total revenue for the six months to end-August decreased by 24% to R396 million and it reported a basic loss of 30.46c per share, down from earnings of 1.46c last year. Its headline loss per share widened to 26.29c from 3.24c previously. Cash on hand at the end of the period amounted to R246 million and its net asset value per share fell 4% to 610.29c.

The company said the delays suffered at its Residential Property Development business would continue to impact its performance for the next six to nine months as handovers and transfers of units were delayed. However, it said it was well positioned with sufficient working capital and pipeline opportunities. The local housing market remained at a shortfall of a couple of million houses and funeral and funeral-related service were a multi-billion rand industry which continued to grow.

We will increase the development and construction of new units over the coming months, once clarity on the impact of Covid-19 becomes clearer, to enable this segment to return to profitability," CEO Wikus Lategan said. "The return to profitability and growth will be driven by both segments where liquidity has been restored, projects are ready to start producing revenue and are being supported by a leaner, more cost-effective structure."

Calgro's shares closed 2.4% down at R2.41 yesterday.

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