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Semigration to the Western Cape drives Balwin’s strong apartment sales during 2022

Thaba Eco Village in Johannesburg South.

Balwin Properties has published its interim results for the six months ended August 2022, recording revenue of R1.6 billion, a 20% increase on the R1.3 billion reported in the prior interim period.

Despite rising interest rates and a constrained economy, client demand for our apartments remained strong and sales recognized in revenue closed up 8% for the period at 1 360 apartments. This was driven primarily by semigration to the Western Cape and our unique lifestyle offering a focus on green living. We are also encouraged by the 1 551 apartments forward sold but not yet recognized in revenue, which will support growth in the next six months and beyond,” commented Balwin Chief Executive, Steve Brookes.

Profit for the six months was up 48% to R173 million (H12022: R117 million). The higher revenue and profit numbers were primarily driven by higher sales volumes of apartments handed over and improved profit margins respectively.

Balwin’s gross profit margin increased by 2% to 26% in the first six months of the year, as a result of focused cost containment measures together with more robust pricing on the sale of early phase apartments.

Our strategy of reducing the yield curve between the first and last phases of a development is gaining traction and is especially noteworthy on the back of the high-cost increases in the construction industry during the period. Demand for our apartments allowed for some elasticity in selling prices, however, the team put in a huge effort to limit cost increases through effective cost engineering and concentrated cost containment, supported by our in-house procurement department. At the same time, we worked closely with our architects on creative design modifications and specifications to reduce costs without compromising on the quality and world leading environmental standards associated with the Balwin brand,” he added.

The group’s net asset value per share increased to 771.39 cents compared to 692.00 cents in the prior corresponding six-month period, whilst earnings per share and headline earnings per share increased 48% to 36.88 cents 47% to 36.63 cents respectively.

Balwin further reported a strong cash position of R581.2 million at period end.

Revenue from Gauteng represented 47% of total revenue from sale of apartments (H1 2022: 60%), with the coastal regions now making up the balance of 53% (H1 2022: 40%). Similarly, the contribution from the KwaZulu-Natal region increased to 21% of total revenue (H1 2022: 10%), mostly as a result of apartments handed over at Izinga Eco Estate (Umhlanga, KwaZulu-Natal) for which no apartments had been handed over yet in the prior comparative period.

The Western Cape made up the balance of 32% of total revenue from sale of apartments (H1 2022: 30%). The changes in revenue contribution from sale of apartments by region were mostly driven by semigration, which had a positive impact on both the number of apartments and selling prices achieved in the coastal regions.

Munyaka, Balwin’s classic development in Waterfall (Johannesburg) once again recorded the highest number of apartments in revenue of 170 (H1 2022: 192), a continuation of strong demand for apartments in the Waterfall City and following the completion and handover of the final four apartments at neighbouring Kikuyu.

Sustained demand was also recorded at Greenbay (Western Cape) and Greencreek (Tshwane East), supporting the continued demand for the Green Collection developments. Thaba Eco Village, De Aan-Zicht and Izinga Eco Estate recognised a combined 319 apartments in revenue during the first six months of the current year.

Balwin has a secure development pipeline of 45 411 apartments across 27 developments in key target nodes, representing an approximate fifteen-year development horizon.

During the financial year, Balwin continued to focus on reducing its environmental impact through innovation in design and building techniques.

An additional 3 563 apartments were registered as EDGE Advanced during the review period. EDGE Advanced requires apartments to achieve an on-site energy saving of 40% or more, an improvement from the 20% savings required for basic EDGE certification in addition to the 20% reduction in water usage and embodied energy in material which was previously a requirement for EDGE certification.

This brings the total number of EDGE certifications to 19 784, of which 12 126 are EDGE Advanced.

Balwin also became the first company in South Africa to have a Science Based target and Net Zero commitment approved by the International Science based target initiative. This commits Balwin to reducing its carbon footprint in line with science-based models to limit global warming to 1.5 degree Celsius.

At the end of August 2022, Balwin held nine Six-Star graded buildings, including its new Gauteng head office, with a further two Six-Star ratings targeted in the current financial year. Balwin has to date received 38 international property awards with a further six won recently. Three of these developments, Thaba Eco Village, Greenbay and Munyaka achieved 5-star gold awards and will compete in the Best in Africa awards.

Looking ahead, Brookes concluded: “From an operational point of view, Balwin remains well positioned despite increasing headwinds and a rising interest rate cycle, with 1 551 apartments forward sold and sustainable demand for our brand. Where necessary, we will support apartment sales with short-term incentives and longer-term loyalty programmes.”

Our focus for the next six months remains on cost containment, appropriate cash management and maintaining our focus on core operations.”

An interim gross dividend of 9.9 cents per ordinary share (H1 2022: 7.4 cents) was declared.