JSE-listed property investment company Calgro M3 recorded a 17.72% year-on-year decrease in its earnings per share (EPS) to 83c for the six months ended August 31.

Headline earnings per share (HEPS) decreased 17.86% to 82.86c a share.

However, its gross profit margin remained stable at 29.43%, compared with 29.57% for the six months ended August 31, 2024, which was achieved by cost-saving initiatives and the benefit of historical land costs. The margin also remained above the group’s target range of 20% to 25%.

The EPS and HEPS values are expected to benefit from the share repurchase executed in August this year, with the impact becoming more evident as the year progresses, given that calculations are based on the weighted average shares in issue for the period, the company says.

During the period under review, 1.3-million ordinary shares were repurchased at an average price of R5.00 a share, resulting in a reduction in share capital of R6.66-million.

The company did not declare an interim dividend, in line with its dividend policy.

“Revenue decreased owing to the shift in capital allocation to the Bankenveld District City project where infrastructure installation has started. This period’s results reflect short-term revenue and profitability pressures owing to this shift in capital allocation.”

Revenue from these installations will be recognised upon finalisation of public sector agreements, the company says.

“With the start of the Bankenveld District City development, we have an opportunity to reshape the development landscape for affordable property development.

“We are confident this time spent on urban design, town planning and innovative building methodologies will result in profit growth and margin accretion in future periods,” says Calgro M3 CEO Ben Pierre Malherbe.

With gross profit margins maintained, its asset base expanded and liquidity preserved, the group is well positioned for long-term sustainable growth through the implementation of its strategic pillars.

“We have dedicated significant time to rethinking our operations and refining our strategic pillars, focusing capital on future opportunities that optimise the portfolio, and reducing debt through a combination of the sale and completion of non-contributing assets and projects,” he says.

Its strategy involves the sale of noncore assets, which are non-contributing assets that the company has no intention to develop in the next five years.

Additionally, it aims to balance its two business segments over the long term by reducing the number of non-contributing projects in the residential property development business and increasing the memorial parks business footprint to diversify risk, he notes.

Its other strategic pillars include managing the relationship between the group’s net debt level in relation to its market capitalisation by delivering on short- to medium-term goals. The company will also focus on enhancing employee expertise through strategic skills development initiatives, he says.

Further, the group's residential property development segment accounts for 91.34% of revenue, and revenue in the segment decreased by 11.59% in the six-month period with buyer sentiment remaining cautious for the first half of the year.

There are signs of a recovering market, as evidenced by consumer appetite improving towards the end of July, and with this trend having continued into August.

During the period, there was a strong focus on unit sales, driving a shift in revenue composition, with unit sales doubling to R317.47-million, up from R146.73-million in the six-month period to end August 2024.

This was partly offset by lower infrastructure revenue in the reporting period, reflecting the completion of a substantial portion of bulk and link infrastructure in legacy developments during prior reporting years.

As a result of infrastructure investments made in these previous reporting periods, the group has sufficient serviced opportunities, at 2 589, to support demand and sales activity for the upcoming financial year, he notes.

“We are pleased to have reduced these by more than half in the six months through innovative targeted marketing campaigns and the sale of units to the property investor market. The increase in appetite for this segment of the market demonstrates the inherent value within our developments, with units returning high rental yields.

“These units are considered well-located, near job opportunities, and offer well-curated lifestyle amenities, including security. Our targeted marketing campaigns and sales to the property investor market have been embedded in the sales strategy,” says Malherbe.

Additionally, the residential property segment reported a reduction in revenue which was partly attributable to the allocation of financial resources to the Bankenveld District City development, which commenced infrastructure installation in the current reporting period.

This development, which will yield more than 20 000 opportunities, has started Phase 1 of road infrastructure upgrades for which Calgro M3 will incur R158-million in costs over the 2026 and 2027 financial periods. It will also start further infrastructure upgrades in the 2027 financial period.

All bulk and link infrastructure has been installed in the Bankenveld District City joint venture.

Further, Calgro M3 is in negotiations with the public sector to finalise the Bankenveld District City infrastructure agreement. All infrastructure installation and on-site work continue to be executed as a private development, he adds.

These discussions and agreements with the public sector will allow Calgro M3 to cater to the lower living-standards measurement housing market within this development once concluded, Malherbe says.

Meanwhile, contributions from the broader residential development pipeline remained well balanced, with construction activities in the Western Cape increasing during the period.

“This aligns with the group’s strategy to adjust construction activity to diversify provincial exposure. The installation of the final stages of infrastructure in the Belhar project was undertaken, and we completed and sold out a further section of the Scottsdene development.

“This positions the Western Cape projects to make a large contribution towards performance in the second half of the financial year,” he says.

Further, in Gauteng, on the existing pipeline, the final bulk and link installations in Fleurhof and Jabulani are nearing completion. These, along with bulk and link investments which occurred over the preceding financial years, resulted in the 2 589 serviced opportunities currently available for development across the residential developments pipeline.

The memorial parks business segment delivered a robust set of results, growing revenue to R39.83-million, up from R36.76 million in the six-month period to end August 2024, while gross profit for the segment increased to R20.07-million, up from R19.03-million in prior comparable period.

“On-site infrastructure activities have started at Platinum City Memorial Park, where final regulatory approvals were obtained during the reporting period. Burials are expected to start in the last quarter of the 2026 financial year, providing the group with more than 28 000 burial opportunities.”

Once Platinum City Memorial Park becomes fully operational, further investments will be directed toward replacing end-of-life parks over the short- to medium-term to support growth in the segment.

In its outlook for the remainder of the financial year, Calgro M3 continues to experience strong demand for both residential housing units and burial sites, solidifying its strategic focus on high-demand niches in the South African economy.

The reductions in interest rates have shown a positive response, albeit at a slower pace than initially anticipated.

Despite the Monetary Policy Committee holding the interest rate at its current level in September, market sentiment shows an uptick, with both increases in home loan volumes and approvals across the market.

“The implementation of our strategic pillars is necessary as the Bankenveld District City development begins and the group positions to execute on fewer projects with equitable contribution levels.

“Simultaneously, the Memorial Parks business has matured, is cash generative and poised for further growth. This revitalised strategy has invigorated the business while also ensuring that our debt structure is aligned with its size and capital requirements,” Malherbe says.