JSE-listed residential focused Balwin Properties released its results for the year ended 28 February 2021, highlighting a continued strong demand for its lifestyle apartments despite the loss of three months’ construction time during the national lockdown.
The group recognised a total of 2 546 apartments in revenue, compared to the 2 715 apartments in its previous financial year. (Apartments are recognised in revenue on the earlier of transfer of ownership or on handover to the owner and subject to guarantees).
“The macro-economic conditions and the devastating impact of Covid-19 are reflected in our results. The hard lockdowns and staggered start to construction means we effectively could not build for a quarter of the financial year” commented Balwin Chief Executive, Steve Brookes.
“Our mitigating measures to limit the impact of the pandemic on our operational and financial performance are nonetheless encouraging”.
During the lockdown period, Balwin adopted a range of innovative but pragmatic solutions, including the launch of their online sales platform, promotions, and other incentives to continue to drive sales. “The 275-basis point reduction in the prime lending rate and an increased preference to work from home further supported significant demand for our lifestyle offering.”
These contingencies limited the decline in revenue of R2.7 billion to 7% and the maintenance of a 27% profit margin compared to the prior period.
Because of limited construction and subsequent apartment handovers during the financial year, earnings and headline earnings per share reduced by 19% to 71.67 cents and 71.47 cents (FY20: 88.02 cents and 87.83 cents) respectively, in line with the Balwin’s market guidance.
The group reported a healthy number of pre-sales beyond the reporting period of 2 499 apartments, a significant increase of 1 855 apartments. Sales were bolstered by especially one- and two-bedroom apartments which accounted for 77% (FY20: 74%) of the total number of apartments recognised in revenue. Balwin continued to focus on capital allocation and reported a cash position of R367.9 million (including restricted cash reserves) at year end. The group’s long-term debt-to-equity ratio was 29% at the end of the reporting year (FY20: 27%), well within the board threshold of 50%. The company is currently undertaking a review of its funding structures with its funding partners to ensure that its projects are optimally funded. In addition, it is exploring new relationships to expand its funding base.
Eight new developments were launched during the financial year, with Balwin increasing the roll-out of its Green Collection developments which now account for 23% of apartments recognised in revenue and contributes 15% (FY20: 6%) of total revenue from sales. In line with its continuous development model, the group expanded its construction pipeline to 62 288 apartments across 28 lifestyle estates in key target nodes, representing an approximate development horizon of fifteen years.
“The fact that we managed to recommence construction without any Covid-19 related disruptions bears testimony to our rigorous approach to health and safety. We have been working around the clock to catch up as much construction as possible without compromising on quality” notes Brookes.
“During the year under review, we achieved three different ISO certifications, for Health & Safety, Environmental and Quality, underscoring our efforts in reducing cost of ownership and ensuring sustainability through our green bonds, EDGE certification with the International Finance Corporation and six-star green rated lifestyle centres”.
Following the partnership with Absa Bank to offer green home loans to Balwin customers through the introduction of the Absa Eco Home Loan, three other major financial institutions – First National Bank, Nedbank, and Standard Bank – have approved this concept. Through this initiative, Balwin’s customers will benefit financially by receiving a reduction in the offered interest rate.
Balwin’s uncompromising approach to quality and continuous innovation was recognised at the Africa and Arabia Property Awards, where the group received seven awards. This brings to 23 the number of international awards recognising the innovation and excellence of the business.
Going forward, Balwin will continue to focus on appropriate cash management and cost containment, whilst remaining alert to opportunities that could enhance the development pipeline in strategic nodes.
“Notwithstanding the current constrained economic environment and uncertainty around a potential third wave of Covid-19 infections, we are positive on the demonstrated resilience of our product. The continued strong sales, the highly successful launch of our online sales platform during lockdown as well as the exceptionally strong pre-sales are encouraging,” Brookes concluded.
