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Voluntary operational update and further trading statement for the six months ended 31 August 2022
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”)
VOLUNTARY OPERATIONAL UPDATE AND FURTHER TRADING STATEMENT FOR THE SIX
MONTHS ENDED 31 AUGUST 2022
Highlights
• Approximately 1 360 apartments sold and recognised in revenue in the
period (H1FY22: 1 261 apartments).
• Approvals have been issued by the City of Tshwane and construction
has commenced at Mooikloof Smart City.
• Launch of De Kuile development in the Western Cape, comprising 883
apartments.
• Filling of the Crystal Lagoon commenced at Munyaka, Waterfall,
Gauteng.
• Continued enhancement to the capital structure with conversion of
certain short-term debt facilities to term-debt funding in a cost
effective and sustainable manner.
• Received a further six awards at the 2022-2023 Africa and Arabia
Property Awards.
Operational update
Home buyers continued to reward Balwin for its unique product offering in
the South African residential property sector, with another pleasing
performance for the six months ended 31 August 2022. 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
its clients. Market dynamics such as semigration have played a prominent
role in boosting demand for Balwin apartments in the Western Cape and KwaZulu-
Natal regions.
Sustained strong demand resulted in an approximate 8% increase in apartments
recognised in revenue for the period. Despite the challenging macro-economic
factors and most notably the construction price inflation experienced in the
industry, the group expects to record a moderate improvement in its gross
profit margin when compared to the prior corresponding period.
Whilst the group continues to maintain a healthy sales rate, rising interest
rates and general economic pressures on clients are expected to temper the
rate at which sales volumes have increased in recent years. This will be
largely mitigated by the healthy pre-sales position of the group, with
approximately 1 700 apartments forward sold beyond the reporting period.
To further address the anticipated challenging economic environment, Balwin
will continue to dynamically optimise its apartment mix based on demand,
whilst ensuring appropriate alignment of the rate of construction to the
rate of sales. The group will also continue to focus on improving margins by
flattening the yield curve between the first and last phase of each
development under construction to increase returns, a discipline that has
generated positive results to date.
The board will continue to place emphasis on appropriate cash management and
capital structure optimisation. In this regard, an additional unsecured term
funding facility was concluded during the period under review as part of the
continued exercise to broaden the group’s funding base in a cost-effective
manner. To provide some certainty in the current market, interest rate
hedging facilities have been obtained on a portion of long-term debt to
mitigate the risk of further interest rate hikes.
Balwin’s annuity businesses are steadily progressing with the majority
contribution to revenue coming from the established fibre and bond
origination businesses. The balance of the remaining early-stage annuity
businesses is not expected to contribute materially to the group’s results
in the current financial year.
Outlook
The board remains positive about the prospects for the core business and
leveraging Balwin’s brand in the development of complementary, annuity-based
revenue streams.
The board, however, notes expected increasing macro-economic headwinds in
the near-to-medium term, particularly with respect to cost price inflation
and rising interest rates. Whilst these factors continue to be closely
monitored and managed, it is expected to place moderate pressure on margins
and the sales rate.
As consistently advised, the Board will continue to place an emphasis on
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.
Further Trading Statement
In accordance with paragraph 3.4(b) of the JSE Limited Listings Requirements
and further to the trading statement released by Balwin on SENS on 25 August
2022, shareholders are advised that there is further certainty regarding the
group’s financial results for the period as follows:
Consolidated earnings per share and headline earnings per share for the
period are expected to increase by between 45% and 50% over the prior
corresponding period, translating into an increase from the prior financial
period’s 24.95 cents to a range of between 36.18 and 37.43 cents per share.
The financial information which this trading statement is based on has not
been reviewed and reported on by the Company’s external auditors.
It is expected that Balwin will release its results for the six-month
period ended 31 August 2022 on or about 31 October 2022.
Corlett Drive
14th September 2022
Sponsor: Investec Bank Limited
Date: 14-09-2022 08:00:00
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