Balwin reports upbeat interim results despite current economy

Kikuyu Estate, Waterfall, Johannesburg.
Kikuyu Estate, Waterfall, Johannesburg.

JSE listed Balwin Properties has reported robust interim results for the six months ended 31 August 2019 despite prevailing economic headwinds and consumer pressure. 

Balwin Chief Executive, Steve Brookes commented:

“The first half results are very encouraging, and the team did an exceptional job delivering against all of our objectives”.

“In response to the weak economy and consumer pressure, we’ve adapted our sales offering to include more one- and two-bedroom apartments. We also launched focused promotional campaigns which have supported strong sales in the reporting period”.

Apart from a strong operational performance, Balwin continued to focus on cash preservation with cash resources increasing to R211 million. 

1 309 apartments were recognised in revenue and handed over (H1FY19: 1058 apartments), an increase of 24% with strong sales at The Blyde (Tshwane East), Ballito Hills (Ballito) and Kikuyu (Waterfall). This included 1 213 build-to-sell apartments and 96 rental apartments sold to Balwin Rentals Proprietary Limited (“Balwin Rentals”). Given current lacklustre market conditions, the Group indicated that it will phase out its elite model on completion of current development projects. 

Revenue increased by 19% to R1 419 million and the company recorded a profit of R185 million for the period. Earnings and headline earnings per share increased to 40 cents, an increase of 4% and 5% over the comparative six month period respectively.

During the six month review period, Balwin achieved another first when it registered over 16 000 apartments as EDGE certified – a world record.

An innovation of the International Finance Corporation, a member of the World Bank Group, EDGE was created to respond to the need for a measurable solution to prove the financial case for building green, and to help jumpstart the proliferation of green buildings. The EDGE standard is set at a minimum of 20% reduction across energy consumption, water usage and embodied energy in materials.

“Balwin Properties has always been differentiated by its innovative approach to environmental management while creating quality lifestyle developments for its clients. We were the first to offer energy efficient appliances as part of the purchase price of an apartment and we are exceptionally proud to have achieved the world’s largest green EDGE registration in partnership with the International Finance Corporation”.

“EDGE registration provides our environmentally conscious buyers and tenants with assurance that they are minimising their own environmental footprint, whilst saving on utility costs over the long term,” said Brookes.

Having recently bolstered the board with the appointment of Messrs Duncan Westcott and Julian Scher as independent non-executive directors (effective from 9 October 2019), the group continues to evolve its corporate governance processes, especially around development opportunities.

“Given our focus on cash preservation, we have evolved our governance processes around development opportunities. Due diligences including costs, infrastructure, zoning and an independent review of residential demand in a specific node have to be successfully concluded before the opportunity is presented for review and recommendation to the Executive Committee and subsequently the Transactions Committee before it ultimately is tabled at board level for final approval and implementation,” Brookes explained.

The exceptional quality of the developments and the creative design of the Balwin product was recognised at the recent Africa and Arabia Property Awards where Balwin received four awards in the categories of “Apartment, For South Africa” for its Ballito Hills development (Ballito), “Leisure Architecture” and “Leisure development for South Africa” for The Blyde development (Tshwane East) and “Developer website for South Africa” for the Balwin website. 

Going forward, the group will focus on executing on its existing pipeline whilst remaining conscious of strategic land opportunities in identified nodes. These opportunities will be contracted in a manner that is not onerous on cash resources.

“Our focus will remain on operational performance with continued emphasis on cash preservation, prudent capital allocation and cost containment,” concluded Brookes.

Balwin has a secured development pipeline of approximately 8 years and 28 127 apartments.

The board declared an interim gross dividend of 11.70 cents per ordinary share, payable out of income reserves for the six months ended 31 August 2019.