Property Flash


May 22 2023

JSE listed Balwin Properties, a developer and the largest owner of sectional title apartments in South Africa which has become known for delivering more EDGE certified homes than any company in the country, released robust financial results for the year to end-February 2023.

The group’s final gross dividend declared was 14.1c per share, bringing the total dividend for year to 24c compared with 20.9c in the 2022 financial year. The group is benefitting from more and more middle class couples and families wanting to buy safe lock-up and goes which are supported by clubhouses and other amenities.

“The past 12 months were tough with increased construction costs, whilst interest rates and higher levels of load shedding affecting consumer confidence. Our relentless focus on cost containment, innovative design efficiencies and careful price adjustments to offset increased costs enabled us to show positive growth of 6% in revenue to R3.3bn and increase profit by 20% to R437m. Additionally, a revised pricing strategy has contributed to robust selling prices and a 2% increase in our gross profit margin to 29%,” Balwin’s CEO, Steve Brookes said.

General increases in selling prices across the apartment portfolio of 12% helped cover rising construction costs and sustain margin growth.

Balwin recognised 2 788 apartments in revenue for the year, down 6% from 2 962 in the prior comparative year. Brookes attributes this to a normalisation in the sales cycle which is comparable to pre-Covid trends.

“Post the pandemic there was a lot of pent-up demand, further boosted by the launch of our iconic Munyaka Beach Living Apartments in Waterfall and the very popular Izinga Eco Estate in Umhlanga which spiked forward sales. The current numbers are in line with the forward sales trends prior to the pandemic,” he said.

Coastal regions contributed 52% of revenue during the year under review, up 12% from the previous financial year, mainly as a result of semigration where people left Johannesburg and Durban to work and stay in cape Town, with especially three-bedroom apartments growing by 23%.

Balwin further reported a robust development pipeline consisting of 43 781 apartments spread across 26 projects, projecting a development horizon spanning approximately 18 years.

Balwin’s recently launched annuities businesses have impressed already. They recorded an aggregate revenue of R83.1m, an increase of 61% on the prior financial year. The business segment recorded a profit of R45.8m. Balwin’s annuity businesses include Balwin Fibre, with 8 230 active clients, Balwin Mortgages where 1 648 bonds were secured during the financial year, Balwin Energy which is currently operating across nine sites and Balwin rentals, a newly launched rental management company.

In line with its sustainability objectives, all new developments undertaken by Balwin Properties are aimed at achieving EDGE Advanced ratings, which recognise excellence in design for greater efficiency. A total of 21,768 apartments developed by Balwin have been registered as EDGE (Excellence in Design for Greater Efficiency) with the International Finance Corporation.

Balwin has achieved significant milestones with more than 14,000 apartments registered as EDGE Advanced, demonstrating energy savings of 40% or more and water savings of 20% or more.

Nine of Balwin’s lifestyle centres have achieved six-star green ratings and have been accredited with net zero carbon ratings by the Green Building Council of South Africa (GBCSA), affirming their ability to generate and maintain a net zero carbon footprint.

In the pursuit of sustainable financing options for its clients, Balwin has secured 1 648 green bonds for home buyers during the period. These bonds not only provide financial benefits but also contribute to significant savings, amounting to a total of R98m over a span of 20 years.

The group closed the year with R607.3m in cash. It’s loan-to-value was 40.7%, flat on the prior financial year’s number and but within the minimum loan covenant requirements.

“The ongoing deterioration in the economic climate will no doubt taper demand to some extent. Our healthy forward sales position of 870 apartments, coupled with successful sales initiatives will mitigate this impact, but we do expect moderate margin pressure in the current year,” said Brookes.

“From an operational perspective, we’ll continue to focus on leveraging our existing land bank and pipeline of developments, with strategic acquisitions considered on an ad-hoc basis, especially in the Western Cape. The emphasis will however be on continued prudent cash management and responsible environmental management,” he said.

Semigration was clearly visible at Balwin, with Gauteng down to 48% of apartment volumes from 61% in the prior period.

Critics believe that Balwin needs to achieve strong sales in the Western Cape and KwaZulu-Natal in the 2024 financial year as Gautengers battle financially amid loadshedding and a worsening standard of living.

Balwin focuses on the turnkey development and sale of sectional-title apartments as well as surrounding infrastructure, in the mid to upper market segment. Estates typically consist of between 1 000 and 5 000 sectional title residential apartments and are located in high-density, high-growth nodes across key metropolitan areas in Johannesburg, Tshwane, the Western Cape, and KwaZulu-Natal.

Balwin’s share price closed 2.84% higher on Monday at R2.90, giving the company a market capitalisation of R1.5bn.

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