JSE-listed Balwin Properties says it recorded robust financial results for the six months ended August 31, with revenue of R1.3-billion - a 41% increase on the revenue of R929.6-million reported for the prior comparable period, which had been impacted on by Covid-19-related measures.
Operating profit for the period surged 44% to R158.6-million, on the back of an increased number of apartments recognised in revenue, which increased from 896 apartments in the prior comparative period to 1 261 apartments.
The group’s gross profit increased by 36% from the prior comparative period, although at a slightly reduced profit margin of 24%, which was impacted on by strategic marketing initiatives undertaken to grow sales in response to the current constrained economic environment.
In line with the historic yield curve, the gross margin of the relatively early-stage developments will improve as they mature owing to the phase-by-phase increase in the selling price exceeding the incremental development costs for each new phase, Balwin notes.
It says that it, therefore, remains confident that its profit margin will return to its target of the low-to-mid 30% range in the short to medium term, based on ongoing cost-cutting initiatives and a gradual recovery in the economy.
Operating expenses increased to R151-million at period-end, up 25% on the prior period, mainly driven by increased sales commissions on the back of the 41% increase in revenue and one-off fees in relation to the raising of a R500-million loan which Balwin says will result in long-term benefits for the business.
“Our results reflect a pleasing recovery from the challenging market conditions experienced in the prior period owing to the Covid-19 pandemic. Operational activity has steadily recovered to pre-Covid-19 levels, supported by sustained demand for apartments,” comments CEO Steve Brookes.
The average selling price per apartment of R1.2-million remained consistent with the comparative prior year average selling price.
Balwin has pre-sold 2 846 apartments beyond the reporting period, an increase of 347 apartments compared with the prior six-month period and indicative of strong sustained demand.
In line with the group’s policy to only recognise apartments in revenue on the earlier of handover or occupation, these apartments are not reflected in the financials.
The group has a secure development pipeline of 56 313 apartments across 29 developments in key target nodes. This represents about a 15- to-20-year development horizon.
“We continued to focus on reducing our environmental impact through innovation in design and building techniques. All apartments developed in the period were registered for the International Finance Corporation’s Excellence in Design for Greater Efficiency (EDGE) certification, with 471 apartments having received the certification in the period under review.
“We are exceptionally proud to report that in the six-month reporting period, three Lifestyle Centres received a net-zero rating from the Green Building Council of South Africa, and we expect a further three lifestyle centres to achieve a similar rating before the financial year-end. Balwin currently has five Six-Star Green rated buildings, a record in Africa,” Brookes points out.
A total of 27 719 apartments have been registered as EDGE Advanced since January.
During the period, Balwin continued to engage with its funding partners to ensure that appropriate facilities and financial support remains in place.
Through this focus on capital allocation, the group increased its cash position by R311-million on the comparative period to a strong R738.8-million at period-end.
In addition, Balwin negotiated a R500-million loan facility with Stanlib during the period.
During the period, Balwin successfully concluded a broad-based black economic empowerment transaction with its partner, Reggie Kukama, with shareholders having approved the transaction on September 6.
“Contributions from annuity income initiatives currently constitute a negligible portion of the total profits of the group, however, the board plans to pursue potential annuity opportunities that are complementary to the core business model while leveraging off the Balwin brand,” Brookes says.
He notes that the group will focus on the opportunities and growth of the Green Collection model.
He also points to optimism regarding the State’s Strategic Integrated Projects, with continued positive engagement with government in this regard.
Brookes says the group has two projects in this space at the moment, and has been asked to accelerate others.
A final gross dividend of 7.4c per ordinary share was declared for the period.
The prior dividend included a previously deferred dividend that was withheld at the end of the 2020 financial year.