Ya gotta dig it: Calgro’s surely not making a grave mistake
Memorial parks, better known as graveyards, have become a useful ‘death niche’ for the property group
With South Africa’s stagnant economy threatening to bury prospects for many residential property developers, it’s heartening to see Calgro M3 finding traction in its graveyard shift.
This week Calgro announced the expansion of its fledgling memorial parks business to the Western Cape and the Free State and bringing the number of sites owned and managed by the group to five.
There are plans to keep expanding this hallowed niche into KwaZulu-Natal, the Eastern Cape and Tshwane.At this early juncture, the memorial parks business accounts for around 5% of Calgro’s after-tax profits. But this could grow markedly in the years ahead with a project pipeline of R2.2-billion and a lofty targeted return on equity (ROE) of more than 30%.
The company has indicated that with 921 graves sold in the last financial year and sales steadily increasing, the memorial parks segment could chip in around 10% of overall profits in the next financial year.
Not surprisingly Calgro is hoping to capitalise further on its “death niche” with plans to develop insurance-related products for the memorial parks business by partnering with insurance specialists.
Funeral insurance is a vibrant business in SA, with estimates the industry is worth more that R7-billion.
A further diversification in income streams will probably be welcomed by Calgro shareholders. On the other hand, more cynical investors might raise a red flag – arguing that a more intensive focus on its core property development operations should be front of mind in these tremulous times.