Good afternoon, and thank you for everyone who has joined us today for feedback on the interim results for the period ended August 31, 2026. I am joined today by our CFO, Sayuri Naicker, and we will be taking you through the presentation. We will answer questions at the end of the presentation. You are welcome to start queuing questions. We will get back to them at the end of the session if not addressed during the presentation. This afternoon, we will take you through strategic progress made, provide feedback on the period under review, and underlying business performance. Sayuri will take you through the financial review. We will then have a look at the interpretation of what the future holds. Starting with a look at the strategic progress made. During the six-months period, the Group continued to actively execute its refined strategy as approved by the board.
We made progress on advancing the sale of non-core assets, although the effects of our efforts are not yet reflected in the numbers. We continued the construction of and trading out of non-core projects. This one, and important to note, ensuring core projects remained appropriately serviced and ready for implementation. While we indicated that we would reduce debt levels in the long-term, as predicted, levels first moved in the wrong direction in support of the execution of the strategy in the short-term. We will go into more detail during the presentation in a slide or two. We made meaningful progress in reducing stock levels held on non-core projects and advanced the installation of bulk and link infrastructure on the BDC development. Both these key milestones in execution of the Group strategy.
Before I go into the detail, I want to start with a reminder of the four strategic pillars as previously shared. These are, firstly, the sale of non-core assets and the trading out of non-core projects. These initiatives are progressing well, although not reflected in the numbers. I will go into more detail and timelines on the next slide. Secondly, we indicated that we want to focus on integrated developments of scale. We stated a maximum five integrated developments to be executed at a time while expanding Memorial Parks business. Thirdly, we said we want a reduction of debt in the long-term. This is a work in progress while trading out non-core projects and investing in infrastructure on the BDC project to ensure sustainability. This ratio moved in the wrong direction as predicted. The fourth pillar, strategic skills development.
This is progressing well via the investment in training of staff and appointment of specialist consultants for the transfer of skills. This will allow the Group to grow into the BDC project with different densities and skill sets required, setting a new benchmark for integrated developments. All this while keeping an eye on capital allocation, cash generation, and return on invested capital. These initiatives will allow the Group to strengthen our financial position by unlocking capital invested, support sustainable growth by investing in strategic infrastructure, and improve shareholder returns. Taking a deeper look at progress on each pillar, I will start with the sale of non-core assets. We know the value of these projects, and it is not the Group's intention to dispose of these assets at all cost, but extract realistic values. It needs to be noted that there is nothing wrong with these projects classified as non-core.
The Group can simply not afford to roll out these projects all at the same time in the current environment. Not developing them erodes Group return on invested capital. Let's start with the sale of non-core assets. The sale of these assets are divided into three buckets, namely short- term, medium- term, and long- term. Our target is the extraction of the maximum value of these assets in a structured way over the next five years. Looking at Bucket 1, which is short-term, we take a 12 months view, includes Cornubia and the Vredehoek projects. Both these projects were aimed at the high segment of the residential market and no longer classified as core business. Looking at Cornubia, we accepted an offer to purchase for the land parcel. The deal will become unconditional upon finalization of a due diligence process. It's in process.
Vredehoek, also a short-term project. Memorandum of Understanding in relation to the structured exit has been received. Due diligence is expected to be finalized in the second half of the financial year, also in process. Moving to Bucket 2, planned to be executed in the medium-term. This include the mid to high properties acquired for the development of the high segment of the market previously. In that regard, for the remaining land parcels, three land parcels are being investigated for repurposing as Memorial Parks. Support for the rezoning of two of these land parcels were received in the period. Subdivision process commenced on the fourth land parcel, allowing for the outright sale of the properties. Also in the second bucket is the Klipkop project. The reinstatement of rights is in the process and is expected to be completed in the current financial year.
Property will be actively marketed once rights are in place, allowing for the maximum value to be unlocked. The third bucket, which is a longer -term, we look at Witpoortjie. The Witpoortjie project requires the installation of electrical bulk infrastructure and currently competes for capital with the Group's core integrated property pipeline. The entrance road of the project, which is a JRA asset, sustained damage due to undermining and require municipal budget allocation to fund the repairs. Various options are currently being explored with the city. There's no fixed formula that is followed, and various options are being considered, considering holding cost, opportunity cost, et cetera. Secondly, we said we will trade out of non-core developments, allowing the Group to focus on integrated developments of scale, while expanding of Memorial Parks footprint. We are making progress.
If we look at Scottsdene, 12 months ago, the project had 300 half-built units that were invaded and illegally occupied years ago. Currently, 140 of the remaining 120 units are under construction with a guaranteed takeoff agreement with a rental investor. We expect construction to be completed in the financial year, leaving 80 units to be constructed to complete the project. Looking at Vista, the bulk and link and Phase 1 internal services are completed and handed over to the municipal-owned entities, unlocking 2,000 residential opportunities. Sales of service stands will commence once clearance is obtained from the local municipality. The Group will not carry construction or sales risk and sell the serviced opportunities. Looking at Jabulani, bulk electrical infrastructure was upgraded in the period, allowing for units previously handed over to the province to be occupied.
Construction of additional 704 units contracted for sale to the provincial government can commence once budget allocation for units are finalized, resulting in 293 units to be sold to complete the project. The mid-to-high portfolio. Unit sales remain ongoing while making good progress in reducing stock on hand on the Leeuwenvale retirement project. The intention is to complete the construction of the last 25 units in the new financial year, allowing the Group to exit this project. The expansion of the Memorial Parks business is ongoing, with the Group strategically investigating the repurpose of Group-owned land previously acquired for the mid to high segment of the market. The objective remains the opening of new Memorial Park every two years. Getting back to core business, it's important to balance the focus of the disposal of non-core assets and trading out of projects with sustaining the development pipeline.
The reason for trading out non-core asset is to allow the Group to focus on core business. The business will continue delivering value-for-money homes within integrated developments, catering for a broad spectrum of market segments, with particular emphasis on addressing housing demand in the underserved communities. This core development pipeline remains strong, with more than 30,000 units to be developed. Looking at the pipeline classified as core business more closely, we start with the Bankenveld District City, previously referred to as BDC development, yielding 20,000 opportunities. The bulk and link infrastructure for Phase 1 is currently being installed, resulting in 5,900 residential opportunities being unlocked in the first phase. Moving to Fleurhof, the bulk and link for 4,700 opportunities completed and internal infrastructure for 600 units is ready for development.
South Hills, installation of electrical bulk and link currently underway that will unlock 4,500 opportunities on the western side of the project. Moving to the Western Cape in Belhar, 620 student beds scheduled for completion in the third quarter of the 2027 financial year, and 968 units contracted to commence construction before year-end. We're actively looking at replacement of project in Belhar that is expected to reach end of life in the next three years. It's important to note that focus on a maximum of five core projects without the distraction of non-core assets and project nearing end of life will assist the Group to improve the implementation timelines from date of investment to unlocking capital investment. Looking at the period under review, I'll only be highlighting the key metrics, and Sayuri will take you through the detail.
The Group grew net asset value with earnings per share and headline earnings per share declining in a difficult trading environment. Profit margins were retained, and debt moved in the wrong direction while trading out non-core projects. Net debt to equity increased, like I said, and the rolling return on incremental invested capital improving in the comparable period. Sayuri will unpack the numbers and underlying reasons for these movements. Moving away from the numbers, let's look at the underlying business performance. Starting with the development business, revenue was up, and profit margin was retained. The segment delivered a consistent performance in a challenging market, with the end-user constraint and the affordable housing recovery slower than expected. The increased focus on investor market was sustained.
Through our sales-led model, the Group has 1,418 opportunities under construction or held in stock, with 55% of those opportunities sold via guaranteed offtake agreements to investor buyers. A further 968 opportunities, as previously mentioned, are contracted ahead of the construction start in the second half of the financial year. The reduction in revenue reflects capital tied up in work in progress to be recognized on completion. As mentioned previously, progress was made on the reduction disposal of non-core assets held in stock, with strong reductions at Leeuwenvale and South Hills lifestyle estate projects.
The completion of bulk and link infrastructure on the Bankenveld project is on track for quarter one in the 2028 financial year, with USDG funding agreement with the City of Johannesburg recommended for council approval during the period, and we are now awaiting the finalization of agreements that will allow the Group to start recovering the capital invested in bulk and link infrastructure. Diversification in the product offerings of the affordable housing market segment saw the successful rollout of a product mix consisting of bachelor, one-bedroom, and two-bedroom units in Fleurhof and attracted strong demand. Looking at growth, an agreement was entered for the acquisition of a land parcel adjacent to the Fleurhof project, adding a minimum of 968 additional units, capitalizing on the bulk and link infrastructure created during the project's lifespan. The Western Cape expansion discussion is still ongoing.
Looking at the Memorial Parks. The Memorial Parks business experienced another year of growth in revenue, with revenue reaching ZAR 47.8 million compared to ZAR 39.8 million in the previous comparable year, positively impacted by maturing lay-by sales, which constituted 26.2% of the segment revenue. The gross margin remained robust and above 50%. The successful launch of the Rustenburg Memorial Park contributed ZAR 1 million in sales and ZAR 0.5 million in cash contributions. Encouragingly, time from launch to contributing improved in comparison with previous parks launched. Some 60% of the new park sales were concluded on a lay-by basis, confirming the offering as an effective entry point into new markets. Infrastructure rollout continued, with completion expected within the financial period. Looking at growth opportunities, repurposing of Group-owned land previously acquired for the mid-to-high segment is being investigated as previously mentioned.
The lay-by remains resilient, increasing by 23% in the period, and remains the primary lever for reducing the barrier to entry. Cash collections remain strong.
Good afternoon, all, and thank you for joining us today. Before I dive into the detail, four numbers to hold on to. Revenue, ZAR 465.7 million against ZAR 460 million last year. Gross margin at 29.46%, above our blended target range of 20%-25%. Earnings per share and headline earnings per share down, driven primarily by the ZAR 12.7 million modification loss on the joint venture loan facility and not through operations. Underlying trading improved. Memorial Parks revenue is up 22% to ZAR 47.8 million, margin up to 55% from 50%, on strong grave sale and burial volume growth. Covenants, fully compliant with regulated covenant levels. Debt Service Coverage Ratio at 1.35x against a minimum of 1.2x. Net debt to equity at 0.86x, up due to deliberate investment in executing the Group's strategic pillars. Now, looking to the detail. Starting with a statement of comprehensive income.
Revenue for the six-month period was ZAR 465.7 million, up slightly from ZAR 460 million in the comparative year. Gross margin held at 29.46% against 29.43% last year, staying above our 20%-25% target range. Memorial Parks drove the margin strength with revenue up 22% to ZAR 47.8 million, whilst delivering a strong gross profit margin of 55%. Residential revenue was flat at ZAR 417.9 million. Other expenses increased to ZAR 13.2 million from close to null. This is due to the impact of the IFRS 9 modification loss on the renegotiated joint venture loan interest rate, which arose as a result of the shift in the underlying operations within the joint venture, a one-off non-cash adjustment which drove the reduction in EBIT and profit after tax. In summary, revenue and margins remained stable, with a negative impact on earnings per share driven by a once-off non-cash item.
Moving to the statement of cash flow. Cash has been invested into construction activities, which will be recovered on transfer or completion. Cash opened the period at ZAR 183.7 million and closed at ZAR 52.3 million. Operating activities used ZAR 159.9 million against ZAR 88.4 million last year, tied up in infrastructure work in progress at Fleurhof, Jabulani, and Bankenveld, with unit construction close to completion in Scottsdene, South Hills, and Belhar, of which 60% of these units have guaranteed offtake agreements in place, which is anticipated to be transferred towards the end of the financial year. Financing activities generated ZAR 56.1 million, down from ZAR 126.7 million, reflecting ZAR 203 million drawn against ZAR 136 million repaid. In the period, an early refinance on the maturing note within the Group's DMTN program was executed, raising ZAR 50 million against the previous ZAR 33 million note.
Looking at the statement of financial position, total assets grew to ZAR 3.8 billion from ZAR 3.4 billion a year ago, and ZAR 3.7 billion at the February year-end. Construction contracts drove this up to ZAR 2.4 billion from ZAR 2.1 billion, reflecting the sectional title units under construction and infrastructure spend in the period, both of which are to be recovered. Looking at the equity and liability section, borrowings remains the largest obligation for the Group. As explained, borrowings increased to ZAR 1.5 billion from ZAR 1.3 billion, in line with previous expectations of debt increases to execute the Group's strategic pillars, as well as further investment in Bankenveld's infrastructure, the detail of which is included within the borrowing maturities. Outstanding capital, excluding the impact of transaction costs and accrued interest, closed the period at ZAR 1.4 billion.
The movement includes the early refinance of the maturing note and the impact of the short-term working capital facility utilized in the period. Our maturity profile is manageable. The remaining maturity on the bond exchange for FY 2027 has been refinanced subsequent to period end. The remaining maturity profile shows the largest repayment year in FY 2029 at ZAR 515 million. Nothing near term is a concern with discussions underway for debt restructuring with funders in the longer term. On covenants, the Group remains fully compliant with regulated covenants. Net debt to equity, as mentioned, increased to 0.86x against a maximum of 1.5x from 0.74x at February, resultant of the deliberate investment made to execute non-core projects and dispose non-core assets as well as the continual investment into Bankenveld's infrastructure.
Debt service cover reported at 1.35x against a minimum of 1.2x, down from 1.54x at February, still within an acceptable range. This concludes the financial review.
Thank you, Sayuri. In closing, let's take a look at what we believe the future holds. Looking ahead, the Group expects the operating environment to remain constrained, with end-user demand and the pace of recovery of the affordable housing market continuing to be affected by broader macroeconomic and political headwinds. The upcoming municipal elections and associated local government budget uncertainty are expected to add further complexity to approval and service delivery timelines in the near term. This risk is mitigated by the Group's sufficient serviced opportunities on hand, which support development activity independent of near-term municipal processes. Notwithstanding these constraints, the Group will remain focused on the disciplined execution of its approved strategy, prioritizing the continued disposal of non-core assets, the investment in strategic infrastructure, the reduction of net debt, and the expansion of the Memorial Parks segment. Touching on the residential development side, the market demand remains entrenched.
Sustained investor buyer interest. Macroeconomic watch, due to the oil price and transport and living cost will be monitored. The election and political uncertainty remains a watch item, and the public sector commitment to infrastructure spending remains strong. Looking at the Memorial Parks segment, the market demand for premium burial sites remains high, and we intend to strengthen sustainability of the segment through organic expansion. Operational parks are performing well with improved timelines from launch to contribution monitored. Organic expansion through repurposing Group-owned land previously acquired for mid to high segment of the market is currently being explored. On the outlook, in summary, during this constrained consumer environment, we see the demand for affordable housing in well-located areas to be retained in close proximity to job opportunities. Internal construction activity will remain underpinned by a sales-led approach with offtake agreements prior to construction, managing our exposure.
Continuous investment in strategic infrastructure, including the Bankenveld project, in support of the Group long-term development pipeline to deliver sustainable growth. The Group takes a positive but measured outlook amid current market uncertainties with a focus on infrastructure amid market uncertainty. As a Group, we've been through these election cycles before, acknowledging that the election does not resolve all uncertainties, and we will continue to manage these cycles and uncertainties with the utmost care. That brings us to the end of our presentation, and we will now take questions.
Okay.
Okay, I think we can go straight into the question- and- answers. Allistiar, will you read them as they come through, and then we will address them?
Thanks, Sayuri. I've got three questions from Ray Walbe. First question is: once deals and due diligence are finalized, what revenue amounts are Cornubia and Vredehoek sales expected to raise? Will the funds from these sales mainly be used to repay debt?
Okay. Just on the numbers, let's start with the numbers on them. If you look at the— We said we will take a five-year view. We don't want to give these assets away. The intention is to unlock about ZAR 600 million in the next two years, two and a half years maybe, to start off the disposal of non-core assets. At the same time, these projects that's nearing completion, there's about ZAR 300 million locked up in these projects that we're currently trading out. You will see that starting to come through in the full-year results, and then take a period to roll out. But yeah, although we said it will take us five years to get it, the intention is not to wait five years. You will start seeing them through the other numbers in the next six months.
Second question from Ray as well. Of the ZAR 2.4 billion in construction contracts, roughly how much is completed or nearly complete units? How much is homes still being built, and how much is bulk infrastructure, including BDC? Once the City of Johannesburg's grant agreement for BDC is signed, how much of your infrastructure spend will it repay, over what period, and does the November 4 election put the council approval date at risk? The grant is the Urban Settlements Development Grant.
I think the first question, let's just address the elections on the November 4th. The November 4th shouldn't affect our approval processes. We've gone through the mayoral committee and council out there. This is now handed over to the city manager and is in the hands of the officials, so we don't see that. Saying that, the November 4th does not solve everything. It's just we will go into a new. There will be a change of guard and there will be delays. But what we're currently sitting with, we're sitting with 1,700 service opportunities that we can build on. We don't need any approvals for that. We don't need to ask permission for those. We've got sufficient to develop. At the same time, I think we reported 1,400-odd units under construction and held in stock.
Those are sufficient to see us through the next six months. So we don't expect everything to be sorted by November. We'll go through this process, but we've got sufficient stock on hand to keep on trading and enough service opportunities to go on then. Allistiar, is there something I did not answer on that?
Of the ZAR 2.4 billion in construction contracts—
Yeah.
—roughly how much is completed or nearly complete units?
Yeah, I think of the complete work balance, you are looking at roughly ZAR 300 million-ish of completed units. Then bulk and link is the largest contributor to that. It sits as the large contributor in that particular asset base. Also, that includes what we have spent to date on Bankenveld, which is yet to be recovered.
Another question from Ray. Calgro ended August with ZAR 52 million of cash and ZAR 150 million of debt due before February 28, 2027. How much committed undrawn bank funding does Calgro have today, where the ZAR 50 million and ZAR 33 million notes due on October 2 repaid in full? How much operating cash before interest do you expect from the Scottsdene, South Hills, and Belhar transfers in the second half? At what repo rate does your Debt Service Cover age Ratio fall to the 1.2 minimum?
Okay, let us start with the refi. We had two bonds which were up for maturity on October 2nd. One of them was moved forward into the reporting period. That is the ZAR 17 million uplift in the one bond. The second bond of ZAR 50 million was refinanced on October 2nd, so that has been settled. From committed facilities, the Group has signed the Proparco facility, which is a EUR 20 million facility, which is actually we have just finalized the CPs on that particular facility for distribution. That is current committed facilities. We have a few others, but they are still in the negotiation phases. Then, am I missing anything? Well, lots of parts.
How much operating cash before interest do you expect from the Scottsdene, South Hills, and Belhar transfers in the second half?
I think roughly anywhere between, I must just now quickly do some maths in my head. About ZAR 150 million-ish with the Belhar and the Scottsdene.
Lastly, at what repo rate does your Debt Service Coverage Ratio fall to the 1.2 minimum?
Sure. That one, I think I am going to have to come back to you. Currently, our average debt rate is about 11%, and we are sitting just above that.
I've two questions from Rowan Guller. I'll deal with the first one. Where are you in the cash investment and development cycle, and what is the target debt level after non-core sales?
It depends on the project, so we need to look at it project for project. We're currently quite heavily investing in the Bankenveld projects, so we're definitely in an investment phase on that particular cycle without seeing much returns. The second part of that question was?
I think just quickly on that, Sayuri. I think it's important to note that the investment in Bankenveld, as where we currently find ourselves, we investing into the first phase of the bulk and link infrastructure. That will complete. It's scheduled for completion in April 2027, next year. So we're reaching completion on that, and that will unlock the first 5,900 opportunities. So we're in a heavy investing cycle currently. As soon as we've reached that and the roads are handed over, we'll be in a position where we can invest in internal infrastructure and the construction of units. Those are much shorter cycles. That's on extension-specific , where we'll start servicing 1,000 units on a specific stand. A stand, and when the construction is taking place, we'll be able to unlock that.
The long-term investment phase for Bankenveld will reach that first maturity in April, where we would have invested the capital to allow us to start, and then as we go on, we'll start investing into the second phase. But there's no need to immediately start investing in that second phase as yet.
On the cash investment cycle, Bankenveld is obviously heavily cash investing at the moment. The other non-core projects and more non-core projects and non-core assets also are in a bit of an investment phase, where you need to put the money into the ground in order to liquidate the particular asset. We do see ourselves in an investing phase, hence the reason for the uptick in the debt balance. As those are liquidated, we would look to reduce that debt balance, on an ongoing basis. With regards to where we anticipate the debt level to sit, currently, we would like to bring it closer to the ZAR 1 billion mark over the long term. However, as I say, we will need to invest in order to liquidate.
Rowan's second question: Are lenders still actively lending into the sub-ZAR 1 million housing sector?
Yes, we definitely see the support in that market segment, saying that the consumer is staying under pressure, there is no doubt about that. We sustained our focus into the segment where is the investor buyer. We did a lot more sales this reporting period aimed at the rental market, not the man in the street. I think that is just a function of the consumer still under pressure. But there is support from the financial institutions. One thing we have also noted that the demand has not gone away. Our ability to convert those sales into bankable transactions, that is what you see coming through with the consumer under pressure. There is a definite focus on better-located projects. There is no doubt about that. The market is still there.
The days of developing on the periphery of the cities and the metros, I think you need to have better-located projects to attract this market segment in the current environment.
There are currently no further questions.
Okay.
Thank you. If there is anything else, you've got the contact details, you're welcome to contact us. We'll come back to you on questions that we haven't got.
There's one that has just come through from Richard Cheeseman. Congratulations for the solid results in a tough environment. Please can you walk us through the Group's sales markup and revenue recognition policy, especially with point-in-time sales now being a fraction over- time revenue for the property development division. How many property sales make up this period's revenue, and how many contributed to the prior period?
Okay. I think I am going to start and see, you can add to that. Our margin is higher than our target market. We target a market between 20% and 25% return. That is the return we would like to see on average over the development cycle of the integrated developments. The reason why we are a little bit higher than the market segment is because we have not got as much exposure to the lower segment of the market. The subsidized segments have got lower margins. Going through these uncertainties leading up to the elections, we did not have a big exposure building for the public sector. That firstly resulted on the margin a little bit higher than expected, and that will normalize as soon as we have a bigger exposure to the lower segment of the market.
Okay. As for the revenue recognition, Calgro utilizes two accounting methodologies for our revenue recognition, be it point-in-time or over time. The over-time contracts are driven through these guaranteed offtake agreements. When you have a guaranteed agreement with someone to purchase the units, you can recognize revenue over the period of construction. Whereas if you have sectional title developments where we build on our own balance sheet and sell to the end user, those particular transactions are recognized at a point in time when those units transfer to the end user.
I think that is why I made the comment earlier to say the trading out of these projects nearing end of life was not reflected in these numbers. We are investing into them, and like Scottsdene, like Sayuri mentioned, we are currently putting the cash in there to build these units and on transfer, which is scheduled for before February, year-end, you will see the cash coming back on those investments.
Cool. Nothing else.
Yeah, if there's nothing else, you're welcome to send us a mail. We'll come back to you. Thank you. Thanks for joining us this afternoon.
Thank you.