Three property registration delays have impacted on Balwin Properties' otherwise glowing half-year results, according to the residential property developer, which saw a 36% decline in headline earnings a share and earnings a share to 37c respectively in the six months to August 31.

The group’s operating profit was also down 26% to R235-million. However, CEO Stephen Brookes explained to Engineering News Online that, had all outstanding units registered prior to the group’s results being finalised, profit after tax would have been R237-million.

He explained that, as Balwin’s revenue has traditionally been recognised on the transfer and registration of properties, it prematurely impacted on the company’s bottom line.

“We have subsequently consulted with the JSE and Deloitte, our auditors, and have changed our estimated revenue going forward. In future, revenue will be recognised earlier, when we’ve got guarantees [from the bank] and clients have moved in,” said Brookes, further noting that this change would lead to greater predictability in earnings.

He added that the latest results were evidence of teething issues and the company’s short-term experience as a listed company since joining the Johannesburg Stock Exchange in October 2015.

“However, with our change in accounting, this year’s results are better than last year’s and it’s really looking good for our year-end for 2017,” he said.

Moreover, Brookes pointed out that two of the three outstanding transfers impacting on the half-year results had been finalised by October, including 89 apartments in the Malakite development, east of Johannesburg, and 119 apartments in Pretoria’s Grove Lane development.

Sixty-nine apartments in the Amsterdam development, north of Johannesburg, are, however, still in the transfer process, though the buyers have occupied the properties and are paying occupational rent. Brookes noted that these transfers would probably be finalised by December or early January.

He added that transfer of the first phase in a new development traditionally takes longer than usual to register, owing to a protracted council approval process, and that the turnaround on subsequent approval phases is generally more seamless.

Meanwhile, despite Balwin operating under severe pressure in the challenged economy, with political undercurrents, an ongoing drought and the likelihood of a sovereign downgrade impacting negatively on the rand, Balwin saw a sustained level of demand and rate of bond approvals during the period under review.

Brookes noted that the company’s phased development and financial model ensured that the company mitigated risk as far as possible during tough economic times.

In the six months to August, Balwin maintained strong net-asset value growth, which was up 60% to 334c a share.

The group had 14 developments under construction during the period and constructed 1 033 apartments at an average selling price of R995 911 a unit, in line with its six-month forecast.

Also during the review period, Balwin acquired the development rights of three substantial land parcels in the growing Waterfall node, in Midrand, Gauteng. This will see the group develop about 15 500 sectional title residential units in the area over eight to ten years.

Balwin also acquired two new land parcels in the Western Cape, in Milnerton and Paarl, expanding the company’s pipeline by another 2 000 apartments.

As part of its policy of distributing 30% of its profits to shareholders, Balwin declared a gross dividend of 11c a share.

Meanwhile, Balwin has partnered with international company Crystal Lagoons to establish five man-made lagoons at three of the company’s property developments in South Africa.

These newly developed, patented lagoons, which will feature lagoon frontage, a beach and technically advanced cleaning systems, aim to revolutionise estate living, offering Balwin’s home owners an idyllic beach lifestyle at home.

“We will be the first to market Crystal Lagoons in sub-Saharan Africa, which will revolutionise our sales,” noted Brookes.