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The group on Monday reported a 19% drop in revenue to R188.7m for the year to end-February 2010. Headline earnings per share dropped from 16.32 cents to a loss of 7.64c.
According to Calgro, the delay of its Fleurhof, Jabulani and Jukskei View projects knocked revenue by 18.88%. "Our market was quite dead," said chief financial officer Wikus Lategan. "It took us longer to secure long-term finance."
Calgro focuses mainly on affordable housing, RDP projects and developments for the much talked-about gap market for households which earn between R3 500 and R9 000 per month.
The group's developments include the 400 unit Rabie Ridge development in Midrand, and the 525-unit Naturena Extension in the south of Johannesburg.
According to the group's top brass, additional expenses were incurred by the termination of its sub-contractor agreement on its Pennyville project in south-west Johannesburg. "It was a face-saving exercise and it cost us money," said CEO Ben Pierre Malherbe. "The easiest way to close down [Calgro] would be to provide shoddy workmanship," he said.
Calgro is in the process of repainting 700 Pennyville units. According to Malherbe, low-quality units drive down the value of all the houses in these developments. This scares off financial institutions looking to invest and provide the group with capital to fund projects.
To protect itself from government's failure to pay bills, as in the case of other affordable housing developers like Seakay, Calgro aims to fast-track the private sector component of its projects.
"We don't tender for work, we purchase the land and develop it," said Lategan. "So if the government can't pay for the RDP units, we convert them to affordable houses and take them to market."
Calgro's developments combine RDP houses, affordable houses and walk-up flats.
"On paper it's probably one of the best sectors to be in, but then you look at their results and get this," said Vega Asset Management's Francois du Plessis.
According to Du Plessis, Calgro's cash was completely wiped out during the last year and the sale of one of its subsidiaries for R25m is a "get out of jail free card" that can only be used once.
"These are actually really poor results," he said.
- Fin24.com
