Strong demand for apartment lifestyle cushions Balwin’s results

Balwin Properties' Wedgewood Sandton.
Balwin Properties' Wedgewood Sandton.

Balwin Properties Limited has continued to experience strong demand for its apartments for the year ended on the 28th of February 2021, despite the economic headwinds and market uncertainty.

In a recent trading update released on SENS, the company said that despite losing three months of construction time due to the national lockdowns, it successfully sold and recognised 2 550 apartments in revenue which was slightly down from the 2 715 apartments it sold in the prior financial year.

“As a result of the nationwide hard lockdowns, no construction could take place between the 26th of March 2020 until the start of the easing of restrictions to alert level 3 on the 1st of June last year” comments Steve Brookes, CEO of Balwin. “Even then, the start-up of construction was done on a phased basis, in line with national regulations. This means we lost approximately three months of construction time during the year”.

I am exceptionally proud of our team’s delivery against these odds, literally working around the clock to ensure that we meet customer demands and the quality that they associate with the Balwin brand. Even more significant is the fact that when construction resumed, we did not report any downtime due to Covid-19 infections, which underscores the seriousness we attach to the safety of our staff and suppliers.”

With the group’s launch of an online sales platform during the lockdown period, this virtual showroom supported sales during and beyond lockdown, which were further buoyed by record-low interest rates. Demand for one- and two-bedroom apartments remained strong and comprised approximately 77% (2020:74%) of the total number of apartments recognised in revenue.

Balwin said it expected the slightly lower number of apartments recognised in revenue to translate into an 8% decline in revenue when compared to the prior financial year. Consolidated earnings per share and headline earnings per share for the year ended on the 28th of February 2021 is expected to decrease by between 18% and 23% over the prior corresponding period, resulting in an expected decrease from the prior financial year’s 88 cents per share to between 68 and 72 cents per share.

Although focused cost containment across the business has yielded results, operating costs are expected to increase by about 12% due to increased activity in Balwin Fibre. The gross margin is however anticipated to remain consistent with that of the prior year at around 27%, as marginal selling price growth is offset by the change in mix of apartments sold, and as sales of the Green Collection apartments (Balwin’s most affordable lifestyle offering) ramp up in line with expectations.

In addition to cash management, Balwin remains focused on prudent capital allocation. The company maintained a healthy cash balance despite a reduction of cash on hand, mainly because of a short-term cash timing difference due to continued delays in the timeous registration of apartments and the increased investment into pipeline projects during the year under review. 

The strong demand for Balwin’s apartments is reflected in the approximately 3 300 apartments pre-sold beyond the reporting period, an increase of 2 650 apartments forward sold when compared to the prior financial year. Included in the pre-sold apartments are 795 lifestyle apartments pre-sold at Wedgewood Sandton, Balwin’s conceptual twenty-storey high-rise development located at 114 Rivonia Road, between Mushroom Park and the Radisson Gautrain Hotel – within 200 metres from the Gautrain Sandton Station.

Balwin continues to engage with Government on Mooikloof Mega City, where the Department of Public Works and Infrastructure has committed to fund the external bulk services installations as part of government’s efforts to boost the economy through employment creation and development. In addition to Mooikloof Mega City, Balwin’s Greencreek development consisting of 3 800 apartments in Tshwane East was also gazetted as a Strategic Integrated Project (SIP) post Covid-19 with the potential for the introduction of additional SIPs in other nodes in future.

Balwin embarked on formalising its construction process and focus on build quality through an ISO Certification audit in February 2021. Following this audit, the auditors recommended Balwin to be certified for several ISO 9001, ISO 14001, and ISO 45001 certification, pending the successful technical review and recommendation by the BSI Risk and Compliance team.

“Our brand has been built on consistently delivering quality for more than 25 years,” commented Brookes. “The achievement of the ISO certification will ensure consistency in our construction process aligned to international recognised levels of excellence.”

Going forward, Balwin will continue to focus on appropriate cash management and cost containment while remaining open to prospects that could enhance the Company’s development pipeline in strategic nodes.