Calgro blames squatters and Eskom
Site invasions by squatters, construction delays and water and electricity shortages ensured that 2018 was the worst financial year he has experienced since joining the affordable housing group 11 years ago, says the CEO of Calgro M3.
Water shortages and site invasions as well as the unavailability of electricity at one of its developments sent Calgro’s operating costs soaring with the company incurring R200m worth of one-off items, CEO Wikus Lategan said on Friday after releasing a profit warning for the year to February.
The company said its earnings per share and headline earnings per share for the financial year to February 2019 were expected to be more than 20% lower compared with the year to February 2018.
This means Calgro M3 could slip into a loss per share. Earnings per share for 2019 were expected to range from a profit of 11.36c per share to a loss of 7.42c per share, compared with the 93.91c per share profit reported in 2018. This equated to a decrease of 87.9% to 107.9%.
It expected to report a headline loss per share of 10.56c to 28.58c compared with the 90.12c profit per share reported in the previous corresponding period. This equated to a decrease of 111.71% to 131.71%.
Calgro has spent millions of rand on boosting security at its Scottsdene and Fleurhof developments which had been invaded by squatters.
Additional security and repair costs of about R70.9m were incurred during the reporting period.
Insurance claims were submitted to state-owned shortterm insurance agency Sasria and the company was awaiting the outcome. Accordingly, the insurance claims had not been accounted for yet.
There had also been a temporary unavailability of electricity on Calgro’s Fleurhof project, which resulted in costly standing time of about R23.3m.
A “net realisable value writedown” of R54m was provided for on the sale of the main building in Calgro’s La Vie Nouvelle Lifestyle and Wellness Estate project. The write-down resulted from specification changes and a higher occupancy requirement by the frail-care operator at the site.
Lategan said the company was on track , within six years to comprise three businesses; home building, rentals and memorial park management, which would each contribute a third to its revenue.
“Calgro M3 is a long-term investment. This probably was the worst year I ve experienced since joining the’group but these challenges are temporary and we remain on course with our goals,” he said.
Independent analyst Anthony Clark said Calgro’s profit warning was disappointing. “Management seems to blame everybody apart from themselves.
“Granted, there are issues in the residential housing sector which are beyond many companies’ control, such as illegal occupations, electricity issues and a general slowdown in the residential market due to the weak economy and the bank’s inability to lend the money that many need to fund bonds given the tightening credit basis in this country. But I’d think housing experts would be able to do better,” Clark said.
“If you operate in the housing market or the construction market in this country, shouldn’t you as management, which means that you have your pulse much closer to the underlying infrastructure problems, actually be aware of these issues sooner?
“There must be ways of managing your developments sustainably to mitigate these challenges, such as negotiating with Eskom that you will have power ... long in advance.”
IF YOU OPERATE IN THE HOUSING OR CONSTRUCTION MARKET, SHOULDN’T YOU BE AWARE OF THESE ISSUES SOONER?
R70.9m the additional security and repair costs incurred after invasions by squatters at the Scottsdene and Fleurhof developments