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Unaudited Interim Results for the six months ended 31 August 2015 and Renewal of Cautionary
BALWIN PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2003/028851/06)
Share code: BWN ISIN: ZAE000209532
("Balwin" or "the Company")
Unaudited Interim Results for the six months ended 31 August 2015 and Renewal of Cautionary
HIGHLIGHTS
76% increase in
Earnings per share
100% increase in
Headline earnings per share
45% increase in
Net asset value per share
71% increase in
Revenue
81% increase in
Operating profit
66% increase in
Total comprehensive income
Corporate Overview
Nature of Business
Balwin is a specialist, niche, national large-scale, sectional title, residential property builder and developer targeting
high-density, high-growth metropolitan areas in South Africa. Balwin is committed to delivering exceptional and
sustainable returns on capital through the development of secure, affordable, high-quality, environmentally friendly
and strategically located sectional title residential units which range in size from 45m(2) – 120m(2) and in price from
R599,999 – R1,699,000 per unit. The business primarily operates a build-to-sell model with the strategic objective of retaining
certain residential units for rental ("rental portfolio").
Founded in 1996, the Company has successfully developed, marketed and sold over 70 residential estates.
Developed units are designed to appeal to a wide range of home buyers, including first-time, move-up, active adult,
young professional, young family, older family, retirees as well as buy-to-let. All larger estates have lifestyle centres
which include value-added services such as a spa, restaurant, gym, squash court, action sports
field, games room, movie theatre, heated swimming pools, playgrounds and free wi-fi within lifestyle centres.
Strategy
Balwin is focused on delivering sustainable long-term returns to investors through its unique business model which
benefits from economies of scale, in-house project management and construction. The business model focuses on
providing a quality product to the broad middle income population at an affordable price.
The Company will re-invest profit after tax in order to support the long-term growth of the business while
maintaining dividend distributions in line with the target dividend policy.
In addition to the build to sell model, Balwin is currently in the process of establishing a rental portfolio that will
allow Balwin to diversify revenue streams, and benefit from the capital appreciation of the rental units. Income
from the rental units will be used for the acquisition of land and the construction of developments which will
support the long-term growth of the business.
COMMENTARY
The board of directors presents the unaudited condensed consolidated interim results for the six months ended
31 August 2015.
Operational overview
Balwin is currently developing residential estates across Johannesburg, Pretoria and the Western Cape targeted
at the growing middle income population with the aim of expanding into other metropolitan areas in South Africa such
as Durban and Nelspruit.
Despite a challenging economic environment and recent increases in interest rates, the demand for residential units
remained strong for the period under review. This is evidenced by an increase in the number of residential units sold
in relation to the prior period. The increase in the number of residential units sold has been supported by under-supply
of quality housing within the target price range and an increase in the urban population which has increased the demand
for dense residential developments in target nodes. It is anticipated that due to increased urbanisation, further infrastructure
development in South Africa's cities, combined with the unique quality lifestyle offering, the demand for affordable lifestyle
residential units will increase sustainably over the long term.
Balwin has been successful in the period under review in its expansion into other key target nodes such as Pretoria, Cape Town
and Somerset West. In the Western Cape, the De Velde development has proven to be highly successful. The De Velde development
has won the prestigious Africa Property Award. The award is a symbol of excellence throughout the world. Winning this coveted
award is undisputable evidence that Balwin is capable of outperforming strong contenders within the highly competitive African
Property arena. Balwin has also launched the "The Sandown" in Cape Town and "Paardevlei" in Somerset West, on which construction
is underway with units largely being sold out in phase 1, a few weeks after launch. Balwin has also made headway in expanding into
the Pretoria area with the commencement of the construction of its first development in the area, "Grove Lane". The "Grove Lane"
development has been largely sold out in phase 1 within a few weeks of launch. Balwin has also been successful in securing further
land parcels in the Pretoria and Linbro Park areas. Management plans on the development of the "The Clulee" and "The Reid" in
Linbro Park and plans on the development of the "Riverwalk" in Pretoria East. These developments are included in the current projected
pipeline as set out in the Balwin pre-listing statement dated 1 October 2015 ("PLS").
Balwin has also further expanded into the Johannesburg area with the launch of "The Cambridge" in Bryanston
Sandton, "Westlake" in Modderfontein, "Amsterdam" in Olivedale Randburg and "Balboa Park" in the south of
Johannesburg.
Financial overview
Balwin increased revenue by 71% to R823 million largely due to an increase in the number of units sold in line with increased
demand and operating profit increased by 81% to R319 million for the six months ended 31 August 2015. Earnings per share increased
by 76% to 58 cents per share. Headline earnings per share increased by 100% to 58 cents per share. Shares in issue as at the end of
the reporting period were 400 million. If Balwin was listed on 31 August 2015, the basic and headline earnings per share would reflect
at 49 cents respectively based on 472 million shares in issue. The increase in profitability from the prior period was due to Balwin
being able to deliver focused project management, a product mix between sales of 1, 2 or 3 bedroom units, a larger scale of operations
and economies of scale.
Balwin's financial position remains strong with total assets increasing by 69% to R1 484 million. Non-current
assets decreased by 49% to R36 million. This is due to the realisation of sectional title residential units in the
United Kingdom following a decision to divest of non-core assets in order to continue focusing on the local market
segment. Current assets increased by 79% to R1 448 million primarily due to an increase in developments
under construction. Developments under construction which includes land acquired for development increased by
71% to R1 153 million. The land acquired is in line with the current project pipeline. Total Liabilities increased by
114% due to the movement in other financial liabilities which includes development finance increasing
by 92% to R514 million. Development finance is obtained specifically for a development under construction and
is ring-fenced to the specific phase of development being financed.
Cash on hand for the period ending 31 August 2015 increased by 425% to R179 million. The increase in cash holding
is due to effective cash management and an increase in the financial performance in comparison to the prior period.
Prospects
Balwin has been successful in delivering on the continued demand for secure, value-for-money sectional title residential
lifestyle estates in preferred locations for home-buyers. The Company aims to continue with the roll-out of further large-scale
sectional-title residential developments in its target nodes and plans on expanding its operations into additional new and growing
residential nodes within South Africa's major cities.
It is anticipated that the business will be able to maintain and grow its current sales levels, with a secured project
pipeline and continues to identify land acquisitions which is expected to drive future growth.
Balwin is currently in negotiation for the acquisition of a land parcel in the Kyalami node on which an approximate
15 000 residential units may be developed, which is in addition to the current project pipeline as set out in the PLS.
A cautionary announcement related to the negotiation has been issued on SENS dated 16 October 2015.
The Company will aim to maintain an attractive dividend yield in line with its target dividend policy.
Balwin is currently in the process of developing its first rental unit development, Malakite, in the Greenstone Johannesburg area.
Construction is in line with expectation. This will support the vision of establishing an initial rental portfolio in the 2017
financial year to diversify revenues. As set out in the PLS, the business model remains sufficiently flexible with inherent capacity
in Balwin's operations and the careful phasing of construction linked to pre-sales, to provide operating flexibility and insulation to
absorb unexpected adjustments in response to micro and macro-economic conditions.
In line with prior years and the season, management expects sales volumes to be higher in the second half of the financial year.
Forecast sales of 1 857 units for the 2016 financial year were 83% secured as at 31 August 2015.
Management endeavours to continuously seek opportunities which will create sustainable long-term value for shareholders.
Renewal of Cautionary Announcement
Shareholders are referred to the cautionary announcement released on SENS on 16 October 2015 and are advised that Balwin remains in
negotiations, which, if successfully concluded, may have an impact on the price of Balwin's shares. Accordingly, shareholders are
advised to continue exercising caution when dealing in Balwin's shares until a further announcement is made.
RECONCILIATION OF
HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
BASIC AND HEADLINE EARNINGS PER SHARE
Basic (cents) 58 33 84
Headline (cents) 58 29 78
Tangible net asset value per share (cents) 209 144 174
Net asset value per share (cents) 209 144 174
Shares in issue ('000) 400 000 400 000 400 000
Net asset value 834 842 575 649 694 826
Reconciliation of profit for the period to headline
earnings:
Profit for the period 233 614 133 796 335 175
Adjusted for:
– Profit on disposal of property, plant and equipment – (18 652) (23 678)
Headline earnings 233 614 115 144 311 497
Net asset value per share and tangible net asset value per share is calculated based on 400 000 000 Balwin shares
in issue.
It is further noted that as at 31 August 2015, Balwin's share structure comprised of 10 000 A class, 4 000 B class,
4 000 C class, 40 000 D class and 40 000 E class shares. The share capital was restructured prior to listing, with the
effect that 400 000 000 ordinary shares were in issue prior to listing. The figures calculated above have been based
on these numbers. They represent the best approximator of the share capital in issue at Balwin prior to listing.
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
If Balwin Properties Proprietary Limited was listed at
31 August 2015 the basic and headline earnings would
reflect as:
Basic (cents) 49 – –
Headline (cents) 49 – –
Shares in issue ('000) 472 193 – –
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Revenue 823 405 480 438 1 354 929
Cost of sales (467 068) (302 715) (868 037)
Gross profit 356 337 177 723 486 892
Other income 6 315 38 730 47 092
Operating expenses (43 870) (39 876) (80 042)
Operating profit 318 782 176 577 453 942
Investment revenue 3 499 1 801 5 490
Finance costs (191) (2 800) (4 283)
Profit before taxation 320 090 175 578 455 149
Taxation (88 476) (41 782) (119 974)
Profit for the period 233 614 133 796 335 175
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations 520 7 008 7 160
Total comprehensive income for the period 234 134 140 804 342 335
CONDENSED CONSOLIDATED STATEMENT
FINANCIAL POSITION
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment 31 408 30 567 30 697
Investment property 2 739 39 396 2 392
Deferred tax 1 900 478 1 900
Total non-current assets 36 047 70 441 34 989
Current assets
Developments under construction 1 153 479 675 134 687 450
Loans to shareholders 409 5 082 480
Trade and other receivables 81 369 36 235 143 193
Other financial assets 33 753 58 451 33 672
Cash and cash equivalents 178 674 34 034 129 928
Total current assets 1 447 684 808 936 994 723
Total assets 1 483 731 879 377 1 029 712
Equity and liabilities
Share capital 6 6 6
Reserves (917) (1 588) (1 437)
Retained income 835 753 577 231 696 257
Total equity 834 842 575 649 694 826
Liabilities
Non-current liabilities
Other financial liabilities – – 51 529
Total non-current liabilities – – 51 529
Current liabilities
Trade and other payables 52 194 4 173 67 125
Loans from shareholders 185 - 230
Other financial liabilities 513 879 267 468 195 952
Current tax payable 77 981 30 357 13 264
Provisions 4 650 1 730 6 786
Total current liabilities 648 889 303 728 283 357
Total equity and liabilities 1 483 731 879 377 1 029 712
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Foreign
currency
translation Retained
Share capital reserve income Total equity
R'000 R'000 R'000 R'000
Balance at 1 March 2014 (Audited) 6 (8 597) 455 200 446 609
Total comprehensive income – 7 008 133 796 140 804
Profit for the period 133 796 133 796
Other comprehensive income 7 008 7 008
Dividends – – (11 764) (11 764)
Balance at 31 August 2014 (Unaudited) 6 (1 588) 577 231 575 649
Total comprehensive income – 152 201 379 201 531
Profit for the period 201 379 201 379
Other comprehensive income 152 152
Dividends – – (82 354) (82 354)
Balance at 28 February 2015 (Audited) 6 (1 437) 696 257 694 826
Total comprehensive income – 520 233 614 234 134
Profit for the period 233 614 233 614
Other comprehensive income 520 520
Dividends – (94 118) (94 118)
Balance at 31 August 2015 (Unaudited) 6 (917) 835 753 834 842
CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
Cash flows (used in)/from operating activities
Cash generated (used in)/from operations (100 012) (129 984) 94 022
Interest income 3 499 1 801 5 490
Finance costs (191) (2 800) (4 283)
Tax paid (23 760) (25 057) (121 764)
Net cash (used in)/from operating activities (120 464) (156 040) (26 535)
Cash flows (used in)/from investing activities
Purchase of property, plant and equipment (2 707) (8 231) (11 184)
Sale of property, plant and equipment 42 4 227 28 350
Sale of investment property (350) 164 462 182 543
Net movement of financial assets (81) (3 150) 21 629
Net cash (used in)/from investing activities (3 096) 157 308 221 338
Cash flows (used in)/from financing activities
Proceeds on share issue
Net movement of other financial liabilities 266 398 41 070 20 951
Net movement of shareholders loan 26 (8 384) (3 552)
Net movement of finance leases – (842) (842)
Dividends paid (94 118) (11 764) (94 118)
Net cash (used in)/from financing activities 172 306 20 080 (77 561)
Total cash movement for the period 48 746 21 348 117 242
Cash at the beginning of the period 129 928 12 686 12 686
Total cash at the end of the period 178 674 34 034 129 928
CONDENSED SEGMENTAL REPORTING
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 August 31 August 28 February
2015 2014 2015
R'000 R'000 R'000
UNITED KINGDOM
Segmental statement of financial position
Assets
Property, plant and equipment 809 1 224 707
Investment property 2 739 39 396 2 392
Developments under construction – – –
Trade and other receivables – – –
Other financial assets – – –
Cash and cash equivalents 1 064 976 1 633
Investments – – –
Liabilities
Trade and other payables 176 73 131
Other financial liabilities – – –
Loans from shareholders – – –
Segmental statement of comprehensive income
Revenue – 2 309 2 490
Cost of sales 2 123 148
Operating expenses 521 7 626 6 723
SOUTH AFRICA
Segmental statement of financial position
Assets
Property, plant and equipment 30 599 29 343 29 990
Investment property – – –
Developments under construction 1 153 479 675 134 687 450
Trade and other receivables 81 398 36 235 143 193
Other financial assets 33 753 58 451 33 672
Cash and cash equivalents 177 610 33 058 128 295
Investments 1 1 1
Liabilities
Trade and other payables 52 019 4 100 66 995
Other financial liabilities – 267 468 247 481
Loans from shareholders 185 – 230
Segmental statement of comprehensive income
Revenue 823 405 478 129 1 352 439
Cost of sales 467 066 302 592 867 889
Operating expenses 43 348 32 250 73 319
NOTES
1. Basis of preparation
The unaudited condensed consolidated interim financial results have been prepared in accordance with and
containing the information required by IAS 34: Interim Financial Reporting as well as the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and financial pronouncements as issued by
the Financial Reporting Standards Council, the JSE Listing Requirements and the Companies Act, 2008 (No 71
of 2008) as amended. It has been prepared on the historical cost basis, except for certain financial instruments
which are measured at fair value, and are presented in South African Rand, which is the Group's functional
and presentation currency.
The accounting policies are in terms of International Financial Reporting Standards ("IFRS") and are consistent
with those of the consolidated Financial Statements as at 28 February 2015.
The unaudited condensed consolidated interim financial results have been externally prepared under the
supervision of J Weltman CA(SA), in his capacity as Chief Financial Officer and were approved by the board on
23 November 2015.
The unaudited condensed consolidated interim financial results have not been reviewed or audited by the
Group's external auditors.
2. Subsequent events
Balwin listed in the real estate holding and development sector on the main board of the JSE on 15 October 2015.
3. Dividends
An interim dividend of R94 117 647 has been declared for the period ended 31 August 2015. The interim
dividend was paid to shareholders as at the end of the reporting period. Balwin will aim to declare a final
dividend in line with the target dividend policy.
4. Board of directors
The following changes to the board of directors were effected subsequent to the end of the reporting period:
- Ms Basani Maluleke was appointed as an independent non-executive director with effect from 25 September
2015;
- Mr Hilton Saven was appointed as an independent non-executive director with effect from 21 September
2015;
- Ms Kholeka Winifred Mzondeki was appointed as an independent non-executive director with effect from
25 September 2015;
- Mr Rex Tomlinson was appointed as an independent non-executive director with effect from 21 September
2015;
- Mr Ronen Zekry was appointed as a non-executive director with effect from 21 September 2015;
- Mr Rodney Norman Gray resigned as a director with effect from 20 September 2015;
- Mr Ulrich Gschnaidtner resigned as a director with effect from 20 September 2015.
Directors:
H Saven (Chairperson of the board)*^, SV Brookes (Chief Executive Officer), J Weltman (Chief Financial Officer),
B Maluleke*^, KW Mzondeki*^, R Tomlinson*^, R Zekry^
* Independent
^ Non-executive
Company Secretary:
CIS Company Secretaries
Registered Office:
Block 1, Townsend Office Park
1 Townsend Avenue
Bedfordview
Private Bag X4, Gardenview, 2047
Telephone: 011 450 2818
Sponsor
Investec Bank Limited
Transfer secretary
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07),
70 Marshall Street, Johannesburg, 2001. (PO Box 61051, Marshalltown, 2107)
www.balwin.co.za
Johannesburg, 25 November 2015
Disclaimer
We may make statements that are not historical facts and relate to analyses and other information based on forecasts
of future results and estimates of amounts not yet determinable, such as "prospects", "believe", "anticipate",
"expect", "intend", "seek", "will", "plan", "indicate", "could", "may", "endeavour" and "project" and similar
expressions are intended to identify such forward-looking statements, but are not the exclusive means of identifying
such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties,
both general and specific, and there are risks that predictions, forecasts, projections and other forward-looking
statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove
incorrect, actual results may be very different from those anticipated. The factors that could cause our actual results
to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-
looking statements are discussed in each year's annual report. Forward-looking statements apply only as of the
date on which they are made, and we do not undertake, other than in terms of the Listings Requirements of the
JSE Limited, any obligation to update or revise any of them, whether as a result of new information, future events
or otherwise. All profit forecasts published in this report are unaudited.
Date: 25/11/2015 07:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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