Balwin disappointed with performance of latest financial results

  • Robust demand experienced, especially for the latest developments.
  • Entry into KwaZulu-Natal market with Ballito Hills development.
  • Customer offering improved with Balwin Fibre and solar energy offering.
  • Delays in receiving approvals for new developments impacted performance.
  • 2084 apartments handed over during the period.
  • Final dividend of 21 cents declared.
  • Solid demand sustained with 1328 apartments pre-sold for FY 2019.
  • Significant current pipeline of 39 951 apartments with a 12-year development horizon.

Balwin Properties has announced its financial results for the year ended 28th of February 2018.

The company ensures that it has a number of developments being built and sold across diverse locations in order to reach its annual handover target of between 2000 and 3000 apartments. Balwin launched five new developments during this period including Ballito Hills, the group’s maiden development in KwaZulu-Natal and The Blvde, the first development in Southern Africa which features a Crystal Lagoon.

Balwin’s offering was met with strong demand at an average selling price ranging from R720,000 for a one bedroom to R1,347,000 for a three bedroom for its classic apartments. Delays in obtaining town planning and local authority approvals for the new developments however impacted 696 apartments with handovers ending the year at 2084 apartments.

“We are disappointed by this period’s performance which was largely impacted by the delays in construction. We saw strong demand for our apartments, especially at the new developments. Had the delays not been experienced, we would have handed over close to 2800 apartments which is at the upper end of our annual target.

“We are pleased that all five new developments received approval to begin construction just after the year end and a number of the first phases are due to be handed-over soon.

“To avoid such delays in future, we are committed to buying zoned land where possible” commented Steve Brookes, Chief Executive Officer and founder of Balwin. 

Revenue decreased by 9% to R2.5 billion while the increase in operating expenses was limited to 7% due to good cost management across the business. Additional costs were incurred for the opening of the KwaZulu-Natal division from which revenue will start to flow in the 2019 financial year. The higher number of new developments launched and handed over during the period resulted in a reduction in gross profit margin to 33% (2017: 37%).

“Initial phases of developments are typically generating lower margins with the gross profit margin increasing steadily as phases progress, resulting in an average margin of around 35% for the whole development, which is our overall target,” explained Brookes.

Profit was down 26% to R491 million with earnings per share and headline earnings per share accordingly at 104 cents for the period (FY17:140 cents).

Demand for three-bedroom and two-bedroom apartments slowed over the past year while demand for one-bedroom apartments increased. Balwin has therefore adapted the apartment block configuration of developments to include a newly designed one bedroom apartment with the selling price starting at R599 900.

This results in more one and two bedroom apartments per block, more apartment types to choose from and lower entry price points. Since introducing this new design we have seen a positive response from the market,” added Brookes.

Balwin is focused on delivering sustainable long-term returns to investors through developing large-scale residential estates in key growth nodes in South Africa for the country’s expanding middle income population. The group follows a proven formula for acquiring land for residential development and follows a phased approach to development, with finance secured through the pre-sale of units for each phase. Its unique business model benefits from economies of scale, in-house construction and management and the use of mainly locally produced construction material.

Within its classic model, Balwin developments offer secure, affordable, high-quality, environmentally friendly and conveniently located one-, two- and three-bedroom sectional-title residential apartments, ranging in size from 33 – 120 m2. Prices typically range from R599 900 to R1 799 900 per apartment (including modern fitted kitchen appliances).

The larger developments offer a unique lifestyle centre with well-established concierge and other all-inclusive value added services such as a spa, restaurant, gym, squash court, action sports field, games room, movie theatre, heated swimming pools, playgrounds and free Wi-Fi.

In order to further meet customer requirements, Balwin went beyond its standard offering by introducing solar energy to its developments and fibre through its newly established subsidiary Balwin Fibre.

“All future developments will have fibre and solar energy as a standard offering and we continually enhance our lifestyle centres which are a unique selling proposition for us. I am particularly excited that our Crystal Lagoon at The Blyde in Tshwane is nearly complete and will be opened in spring this year.”

“Meeting customer needs is critical to our success. We always aim to provide the best offering one can find in our target market. We were awarded the prestigious Africa awards for the Paardevlei Lifestyle development in Somerset West and The Polo Fields in Waterfall which is recognition of the exceptional quality and design of our product relative to international standards,” said brookes.

Balwin will continue to focus on the delivery of an innovative lifestyle product to the South African market whilst ongoing urbanisation and the growth of the South African middle-class will increase the demand for affordable high-quality sectional title apartments.

“The main focus for the next financial year is on operational performance and execution across all developments, especially during the initial phases.

We are expecting growth in sales going forward owing to improving consumer sentiment following the change in the country’s political leadership, together with declining interest rates and the lower inflation environment,” concluded Brookes.