Wrap Text
Trading Statement and Business Update for the year ended 28 February 2023
Balwin Properties Limited
(Incorporated in the Republic of South Africa)
Registration number 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
(“Balwin” or “the company” or “the group”)
TRADING STATEMENT AND BUSINESS UPDATE FOR THE YEAR ENDED 28 FEBRUARY 2023
Highlights
- Approximately 2 780 apartments sold and recognised in revenue in the period (FY22: 2
962 apartments).
- Improvement in gross profit margin for the financial year.
- Strong cash position at financial year end with LTV (loan-to-value) well within the target
range.
- Received six international awards at the Africa and Arabia Property Awards.
- Awarded best international social housing at the International Property Awards for our
Greenbay development in the Western Cape.
- Achieved a milestone of over 14,000 apartments certified by the IFC (International
Finance Corporation) as Edge Advanced (Excellence in Design for Greater
Efficiencies).
- Awarded our first net-zero certification for carbon emissions at The Reid development
(Linbro Park, Johannesburg).
Trading statement
In terms of the Listings Requirements of JSE Limited (“JSE”), companies are required to publish
a trading statement as soon as they become reasonably certain that the financial results for
the period to be reported on will differ by more than 20% from that of the previous
corresponding period.
Accordingly, shareholders are advised that:
- Consolidated earnings per share for the year ended 28 February 2023 is expected to
increase by between 17% and 22% over the prior corresponding period, translating into
an increase from the prior financial year’s 77.24 cents to a range of between 90.4 and
94.2 cents per share.
- Consolidated headline earnings per share for the year ended 28 February 2023 is
expected to increase by between 16% and 21% over the prior corresponding period,
translating into an increase from the prior financial year’s 75.88 cents to a range of
between 88.0 and 91.8 cents per share.
The financial information on which this trading statement is based has not been reviewed and
reported on by the Group’s external auditors.
It is expected that Balwin will release its results for the year ended 28 February 2023 (“the
reporting period”) on or about 22 May 2023.
Business update
Despite the challenging macroeconomic conditions experienced in the year, highlighted by
rising interest rates, inflationary increases, prolonged stages of load-shedding and general
financial pressures on consumers, home buyers continued to reward Balwin for its unique
product offering in the South African residential property sector, with another pleasing
performance for the year ended 28 February 2023.
The construction and handover of quality apartments in developments with modern lifestyle
centres continued to be a key differentiator in the market. Balwin’s drive towards
energy efficiency and green living, whilst not only environmentally responsible, is also proving
to be financially rewarding for the group and assists in mitigating the large increases being
experienced by our clients in the cost of utilities and higher interest rates.
Balwin expects to recognise approximately 2 780 apartments in revenue for the period.
Although a reduction from the prior year (2022: 2 962 apartments), management has adopted
a slightly defensive strategy in the handover of apartments in the current year to ensure that
the forward sales position remains robust. This is to provide sales protection into the new
financial year, which is anticipated to present challenging trading conditions.
As communicated over the past year, a significant focus of management has been on
improving the group’s gross profit margin. As a result, the Board is pleased to guide an
improvement in this regard for the period under review. Accordingly, whilst the number of
apartments recognised in revenue has declined slightly, both revenue and gross profit margin
are expected to increase over the prior financial year, resulting in a notable increase in
expected net profit for the reporting period. Revenue growth has been buoyed by selling price
growth together with an increased contribution from the annuity businesses.
Regional trends continue to favour the coastal regions, especially the Western Cape, where
demand remains resilient. Gauteng remains the group’s most significant revenue contributor,
although this has been reduced by strong performances from the Western Cape and KwaZulu-
Natal regions.
Approximately 900 apartments have been forward sold beyond the financial year-end. This
number is lower than the prior financial year (2022: 1 900 apartments), mainly due to pent-up
forward sales demand for developments launched during that period. The group believes that
the current forward sales position provides a healthy buffer as the group continues to
negotiate an increasingly complex trading environment.
In response to the macroeconomic environment, management has introduced compelling
sales incentives for home buyers and investors, which have already shown encouraging results.
This includes incentives for first-time homeowners, a CEO Loyalty Program, a referral fee, and
a planned rental guarantee for investors.
Balwin continues to invest in various green innovations, including the installation of solar energy
solutions at all our active developments. Energy security is an ongoing national crisis and
management is implementing various solutions to address this, ranging from the installation of
generators at some of our developments to battery backup solutions. The first battery backup
solution is planned to go live in April at The Reid, Linbro Park.
Operating expenditure continues to be closely monitored and controlled, although costs
associated with the newly formed annuities businesses had a marginally negative impact. The
annuities businesses continued to gain traction and contribute positively to the bottom line,
albeit not materially at this stage.
Developments under construction continued to increase on the back of ongoing strategic
investments in our development pipeline. These primarily relate to infrastructure investment at
Mooikloof Smart City (Pretoria East) and the recently launched lifestyle centre and lagoon at
Munyaka (Waterfall City, Johannesburg).
The business closed the year with a healthy favourable cash position and continues to closely
monitor, manage and plan cash flows into the foreseeable future.
Debt levels and bank covenants at year-end were comfortably within the Board’s thresholds,
and management continues to target and achieve an LTV within the 35% - 45% range.
Outlook
As we advance, key focus areas remain ongoing improvements in the group’s gross profit
margin through various cost control and efficiency measures and achieving selling price
increases where possible.
Notwithstanding these objectives, the group anticipates margin pressure for at least the first
half of the current financial year, considering the weak macroeconomic outlook, lower
consumer spending, the ongoing impact of load-shedding and the need to adapt selling
prices where appropriate to support the required sales volumes.
To address the current challenging economic environment, management has implemented
several key measures, including:
- Continued vigilance in monitoring market demand and responding by appropriately
adjusting the rate of construction to match to the rate of sales.
- Introduction of compelling sales incentives for home buyers and investors to drive sales.
- Strong attention is being given to managing operating costs sensibly, given the
challenging economic environment.
- Continued roll-out and monetisation of solar energy installations at all our
developments.
The Board remains optimistic about the prospects of the core business and Balwin’s ability to
leverage its brand in developing of complementary, annuity-based revenue streams.
As consistently advised, Balwin will continue to emphasise appropriate cash management and
cost containment throughout the business, including funding measures.
Any forward-looking statements are the responsibility of the Board and have not been
reviewed nor reported on by the company’s auditors.
By order of the Board.
Corlett Drive
17 March 2023
Sponsor: Investec Bank Limited
Date: 17-03-2023 09:17:00
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