Balwin warns of lower full-year earnings

30th March 2021

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed Balwin Properties expects its consolidated earnings a share and headline earnings a share for the year ended February 28, 2021, to be between 18% and 23% lower year-on-year.

During the period, Mooikloof Mega City, Tshwane East and Greencreek were gazetted as Strategic Integrated Projects (SIPs) by government for an initial combined total of about 20 000 apartments.

Balwin successfully launched nine new developments during the year with the initial phases of two of these developments included in revenue.

The company highlighted the launch of Wedgewood (Sandton), the first of the newly introduced lifestyle collection which aims to offer access to affordable, upmarket accommodation in prime locations close to transport nodes and work. Balwin recorded R1-billion of sales in 45 days from launch.

Balwin said that, although the macroeconomic conditions of the past financial year and the impact of Covid-19, are reflected in the results of the group for the period, it is satisfied with the processes implemented to best mitigate the impact of the pandemic on the group’s operational and financial performance.

These measures included the launch of an online sales platform and the implementation of several measures to increase the rate of construction to match the continued strong sales demand for the Balwin product, it says.

Owing to the Covid-19 outbreak and response, construction activity is estimated to have been adversely impacted on by about three months, representing 25% of the year.

Despite this construction delay, Balwin highlighted that it delivered 2 550 apartments to clients which were recognised in revenue for the financial year under review.

This is expected to result in an about 8% reduction in revenue when compared with the prior financial year.

The gross margin of the group is expected to remain consistent with that of the prior corresponding year at about 27%. The average selling price per apartment recorded in the year is also expected to be consistent with that of the prior year, with the marginal selling price growth achieved offset by the change in the mix of apartments sold together with a continued increased contribution of sales recorded from the green collection model, as anticipated.

Cost management remains a priority area. The operating costs of the company are expected to record an inflationary-based increase when compared with the prior corresponding period; however, the group’s operating costs are expected to increase by about 12% as a result of the increased activity in Balwin Fibre.

The company has continued to grow its management body during the period in an ongoing effort to strengthen the leadership team. Focused cost containment in other areas of the business has, however, largely offset these costs, it said.

In addition to cash management, the company continued its focus on capital allocation and was pleased with the cash position at period end despite the reduction in cash on hand.

Balwin paid out full dividends during the year in accordance with the dividend policy of distribution of 30% of profits. This included the final dividend for the 2020 financial year which was previously deferred.

Cash management and cash use will continue to remain a priority focus area for the group and Balwin continues to engage with its funding partners to ensure that appropriate facilities and financial support remain in place, it said.

OUTLOOK

While remaining apprehensive over the prevailing macroeconomic climate and fiscal policy uncertainty, Balwin said it is confident of the resilience of the Balwin product as demonstrated by the sustained demand by its customers.

It also mentioned optimism with respect to the opportunities presented through the recently gazetted SIPs. The company is cautiously and actively engaging with government to best position the business to roll out these projects to the benefit of Balwin’s shareholders, prospective customers and the South African economy.

In this regard, the required capital outlay and funding of the project is being given priority consideration.

Balwin will continue to place an emphasis on appropriate cash management and cost containment while remaining alert to prospects that could enhance its development pipeline in strategic nodes.

Balwin expects to release its results for the period on or about May 17.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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