Calgro M3 says illegal land invasions dented profits
Group CEO Wikus Lategan says that several operational challenges and transactions, coupled with changes in accounting standards, affected the results
Illegal land invasions cost property group Calgro M3 as much as R71m in the year to end-February.
The company, which focuses on residential developments and also develops and manages memorial parks, said on Monday that net profit in the year plunged to just R1.2m, from R120.8m previously.
“These results were impacted by several operational challenges and transactions, coupled with changes in accounting standards,” said group CEO Wikus Lategan.
Calgro M3 said land invasions in Scottsdene had resulted in security costs and damages of R27.9m, while land invasions at Fleurhof cost R43.1m.
“The strategy of this business remains sound, but development-related risk such as the Fleurhof electrification challenge and the Scottsdene illegal invasions mean that Calgro M3 needs to consider a lower initial yield during the rental take-up phase,” the group said.
In March, Bloomberg reported that an SA engineering contractors’ lobby group had asked the government to improve security as criminals had disrupted or vandalised R25.5bn of construction projects across the country.
SA’s construction sector has also been starved of public-sector infrastructure projects, partly because of a lack of funding.
“Should construction activity not improve to acceptable levels after the 2019 national elections, further cost-cutting measures will be implemented,” Lategan said.
Calgro M3 said the difficulties faced by the residential property development business “highlight that risks surrounding relationships with municipalities and local communities have increased”.
As a result, that unit would only focus on Gauteng, the Western Cape, KwaZulu-Natal and the Free State in the short to medium term, the group said.
“This decision means that consideration is being given to the sale of the Eastern Cape, KwaNobuhle project.”
Road-builder Raubex said on Monday that the lack of work in SA, “coupled with violent community unrest affecting a number of sites”, had resulted in “very unfavourable operating conditions”.