Calgro M3 CEO pleads for patience
Land invasions hold the home-builder back
Calgro M3’s CEO Wikus Lategan, has asked investors to be patient, saying that land invasions, which prevented the property group from delivering houses in 2018, will not derail it from achieving its growth plans.
Illegal land invasions cost the company about R71m in its financial year to February, weakening net profit which fell from R120.8m to R1.2m.
Lategan is trying to restructure Calgro to earn equal amounts of revenue from its three businesses — home-building, rentals and memorial parks — within the next six years.
“We had quite a few challenges in 2018. A big part of these were the land invasions. But we managed these which was an expensive process and people did not actually get to our sites so we were still able to develop houses. I believe that we will able to put 2018 behind us and do better in 2019,” he said.
Calgro’s revenue including that of joint venture and associated projects fell 44% to R1.3bn.
A land invasion at its Scottsdene development cost R27.9m in security and damages, while one at Fleurhof cost R43.1m.
“If the SA Police Service and other authorities can help prevent land invasions occurring in 2019, we should be able to save money with respect to security, then we can deliver more houses,” Lategan said.
He said Calgro’s core business, the residential property developments, experienced “an extremely tough year”. T he government had not signed off any of the company’s new developments in the eight weeks up to the national elections.
Calgro has been trying to create annuity income from two other businesses: rental housing and the management of memorial parks.
The residential rental investments got off to a bad start after its joint venture with listed landlord SA Corporate Real Estate failed to gain momentum.
Calgro was building rental houses for SA Corporate through a joint venture called the Afhco Calgro M3 consortium. The consortium was dissolved because SA Corporate’s income yield targets could not be met on numerous developments.
Calgro M3 CEO Wikus Lategan talks to Business Day TV to talk about its annual results
Lategan said the rental business had other landlords working with Calgro. The company still managed to increase occupancy from 9% to 42% on its South Hills project in just two months.
“Tenanting in our Ruimsig project is also progressing well, with Scottsdene set to come on stream in the next few weeks, after the repair of units damaged by illegal invasions,” Lategan said.
The memorial parks business was the best performer of the three businesses, with total sales increasing to R20.9m compared with R12.6m in 2018.
“We believe that we offer the best memorial park services in SA. Our rental business will improve as will our housing development business. We are still on track to be a three-pronged business which mitigates risk should one of the businesses struggle in any particular year,” Lategan said.