Highlights:
– HEPS up 68% to 131 cents
– 83% increase in NAV
– Operating profit 69% higher at R768 million
– Strong cash position and low gearing
– Significant current pipeline of c16 000 units (excl Waterfall) with strong demand continuing
– Expansion into high-growth target nodes in Jhb, Pta and Western Cape on track
Balwin Properties announced this morning an outstanding first set of financial results as a JSE listed company.
The Company reported revenue of R2.1 billion for the 12 months ended 29 February 2016, a 54% increase on the prior year and operating profit of R768 million, up 69%. Headline earnings per share rose 68% to 131 cents with profit after tax of R559 million exceeding the pre-listing forecast of R542 million by R17 million.
Stephen Brookes, Chief Executive Officer and founder of Balwin said:
“As a newly listed company, we are very aware of the importance to achieve our pre-listing forecast targets”.
“I am therefore very excited by this performance, driven primarily by record sales and strong demand, which allowed us to launch several first phase developments during the year”.
“Proceeds from the listing allowed us to settle land costs, positioning us well for growth. We have a secured pipeline of over 16 000 homes, excluding the recently announced Waterfall transaction and have increased developments under construction by 96% for the year.”
Balwin listed on 15 October last year and is differentiated from other JSE listed property companies and REITs as its business strategy is underpinned by generating profits through the development and sale of large-scale residential estates. These estates average in size between 500 and 1 000 units and offer buyers secure, affordable, high-quality and environmentally friendly one, two and three bedroom apartments ranging in size from 45m2 to 120m2.
The financial year saw a record number of registrations totaling 2 087 units. In addition, several first phase developments that were launched during the period, sold out within a few weeks of coming to market.
“Despite a rising interest rate cycle and continued pressure on disposable income, interest in our offering remains resilient. We offer a premium product at market related prices, with tenants finding the lifestyle element including recreation and gym facilities, free wi-fi, a restaurant and spa on the estate very appealing,” added Brookes.
In line with its growth strategy, Balwin concluded several strategic land acquisitions in key nodes such as Bryanston, Olivedale, Linbro Park, Modderfontein and Kyalami during the financial year. The Company also increased its operating footprint in Pretoria East through the acquisition of two land parcels for the development of the Grove Lane (136 units – sold out) and River Walk (6 000 units) estates as well as in the Western Cape through the acquisition of land for the development of The Sandown. At year end, Balwin’s secured pipeline stood at 16 200 homes to be developed across Johannesburg, Pretoria and the Western Cape over approximately seven years.
“In addition to our existing pipeline, we concluded an agreement providing us the right to develop approximately 15 000 more units in the Waterfall node. This development will consist of three different land parcels in close proximity to the newly opened Mall of Africa. I believe our developments will change the way people live, shop, work and play in the node,” said Brookes.
Balwin’s investment proposition is backed by a robust, proven, business model supported by urbanisation and growth of the middle class which should see strong demand continuing. The Company mitigates risk by matching construction to pre-sales and rolling out developments over several phases which are separately financed. “This phased approach to development provides us with an exceptional cash generating ability and scalability that protects the business from macro-economic impacts to some extent,” explained Brookes.
Cash flow generated is closely monitored to ensure that proceeds are reinvested into the business in order to create long term value for shareholders as well as ensuring an appropriate margin of safety is maintained.
Balwin’s policy is to re-invest 70% of its after tax profits back into the business to support development growth, with the remaining 30% of profits distributed to shareholders.
