Calgro M3 builds a broad foundation in tough conditions

Calgro M3 said the increase in the project pipeline had ensured enough construction work for the next seven to eight years.

Calgro M3, a residential property and memorial parks developer, has weathered a subdued operating environment in the construction industry to report significant growth.

Revenue grew to more than R2bn in the year ended-February, accompanied by a 91.2% leap in operating profit. This was underpinned by a strong pipeline of projects, which grew from R19bn to R27bn, and the group’s turnkey approach.

Group MD Wikus Lategan said that under the prevailing conditions in the domestic building industry, the result was acceptable.

“We are pleased to have once again increased revenue and overall profitability of the group,” he said.

The group is a developer of social housing and affordable housing, and develops fully funded government housing and rental units. It also develops homes worth about R700,000. The government assists with bulk service infrastructure on projects.

“We are a property developer that happens to do its own construction,” Mr Lategan said.

Calgro M3 said the increase in the project pipeline had ensured enough construction work for the next seven to eight years.

The bulk of this — 92% of the pipeline — was made up of providing homes in the fully subsidised housing sector, subsidised rentals and lowincome rental housing institutes.

“The result is pretty much in line with our expectations,” Samantha Pauwels, an investment analyst at Cannon Asset Managers, said yesterday.

She said the big jump in the value of the project pipeline was due to the construction of the R5.7bn integrated, 12,000-residential unit Leratong City development in Mogale City, which was to commence soon. This would bring in substantial revenue streams for Calgro M3 for more than 10 years, she said.

Meanwhile, Calgro M3 said its focus in the past year was to ensure that more projects in the pipeline were converted into construction projects, to contribute to revenues.

“The group was successful in this, and currently has 12 of its 17 residential projects in the ground, ensuring that risk is sufficiently spread over projects, provinces and customer bases.” The group also said it had launched its pilot memorial park project near Soweto. It would be a commercially operated burial business.

Mr Lategan said these projects would be rolled out nationally over the next four to five years, as municipalities were struggling to deliver a quality service.

“Judging by the company’s performance for the last few years, there is far more to come from Calgro M3, as they work though their R27bn project pipeline,” Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said yesterday.

“(It) is diversifying across a number of projects in the ground at different phases.”

Mr Nyanga said Calgro M3 was focusing on the full range of accommodation, from RDP houses to housing for middle to high Living Standards Measure groups, “which bodes well in this challenging industry”.