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BALWIN PROPERTIES LIMITED - Unaudited interim results for the six months ended 31 August 2016

Release Date: 15/11/2016 08:03
Code(s): BWN     PDF:  
Wrap Text
Unaudited interim results for the six months ended 31 August 2016

BALWIN PROPERTIES LIMITED                   
Incorporated in the Republic of South Africa
Registration number 2003/028851/06          
Share code: BWN                             
ISIN: ZAE000209532                          
("Balwin" or "the Company") 

INTERIM RESULTS
for the six months ended 31 August 2016                

HIGHLIGHTS

36% decrease in
Earnings per share

36% decrease in
Headline earnings per share

60% increase in
Net asset value per share

9% decrease in
Revenue

26% decrease in
Operating profit

25% decrease in
Profit for the period

COMMENTARY

Corporate overview
Balwin listed in the real estate holding and development sector of the Johannesburg Stock Exchange on 15 October 2015. The
Group is a specialist, niche, national large-scale, residential property developer focused on the turn-key development and sale
of sectional title apartments in the mid to upper market segment. Estates typically consist of between 500 and 1 000 sectional
title residential apartments and are located in high-density, high-growth nodes in the greater Johannesburg, Cape Town and
Pretoria metropolitan areas.

The Group has a secure pipeline of 32 508 apartments across 24 locations in the key target nodes of Western Cape, Johannesburg
and Pretoria, with a 10-year development horizon.

Balwin estates offer secure, affordable, high-quality, environmentally friendly and conveniently located one, two, and three
bedroom sectional-title residential apartments, ranging in size from 45m2 to 120m2. Prices range from R599 999 to R1 699 000
per apartment (including modern fitted kitchen appliances) within the standard operating model.

Apartments are designed to appeal to a wide range of home buyers, catering for first-time, move-up, active adult, young
professional, young family, older family, retirees as well as buy-to-let.

All residential estates are developed and marketed under the Balwin Properties brand, with larger estates (comprising
approximately 500 apartments and above) having a unique lifestyle centre with well-established concierge and other all-
inclusive 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 the 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 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.

Operating model
Balwin operates a build-to-sell model, currently developing and selling between 2 000 and 3 000 sectional-title residential
apartments per year. The Group has the ability to increase this capacity to approximately 3 500 sectional-title residential
apartments per year, based on its existing infrastructure and development pipeline.

Key aspects of operating model:
-  Keeping a constant rate of construction (continuous development) subject to demand - to retain contractors, maintain
   quality, support the build to sell model
-  Insource all critical aspects of Balwin's build to sell model to contain costs and control output
-  Focuses on the mid-market segment in terms of the pricing and location of developments. Key selling points are lifestyle,
   quality and brand
-  Continuous focus on keeping up with international standards and best practice in the design and marketing of Balwin
   developments
-  Target areas are JHB North, JHB South, JHB East, Pretoria, Western Cape and Durban.

Continuous development approach
Balwin follows a continuous development approach. Its success is based on:
-  selling 25 to 30 apartments per location, per month across diverse locations;
-  keeping operational costs and costs of its land acquisitions in line;
-  targeting a profit margin of between 38% and 40%; and
-  executing on its land acquisition strategy in key target nodes.

The continuous development model sustains pricing tension in target nodes and retains key artisanal skills as project teams
revolve between estates, depending on the stage of development at a particular site.

All Balwin estates are built to a standard specification (unique Balwin design, standard finishes, no customer changes) typically
not more than four storey blocks with 10 apartments per block (three bedroom apartments on the ground and first floors, and
one and two bedroom apartments on the upper floors), allowing the Company to benefit from significant economies of scale.

Mitigating development risk
The construction of new developments is generally undertaken against pre-sales to interested buyers. Residential estates are
built and marketed in phases (between 50 and 100 apartments), allowing for appropriate risk management at all stages of the
development process.

Mitigating margin pressure and keeping costs in line
Balwin's policy is to source all major construction material, fittings and furnishings locally, in order to maintain quality and
contain costs. As such imports are minimal and the Company's exposure to currency fluctuations are minimal.
Significant input costs to developments include cement as well as plumbing, electrical and kitchen installations.

Key differentiators
Key differentiators in Balwin's build-to-sell model comprise the ability to deliver a superior offering through economies of
scale, in-house turnkey development including construction and construction management, local sourcing of key materials,
focus within a defined middle-income segment, quality, broad market appeal, partnerships with relevant stakeholders and
competitive pricing of developed apartments in line with or below market.

Balwin's residential estates typically include:
-  24-hour security with well-equipped guard houses;
-  High-quality, ergonomically designed apartments that maximise apartment space and functionality;
-  Eco-friendly fittings, appliances and utilities (such as pre-paid electricity meters and gas and water supply meters);
-  Proximity to amenities such as shopping centres, entertainment and leisure facilities, medical centres and schools, which are
   largely within walking distance of the estate; and
-  Lifestyle centres complete with free wi-fi, concierge service, heated swimming pools, playgrounds, spa, restaurant, gym,
   squash court, action sports fields and running tracks.

Operational performance
The operating environment during the reporting period remained challenging as political undercurrents and the likelihood of a
sovereign downgrade continued to negatively impact on the rand.

This, together with one of the worst droughts in the country's history resulted in inflation remaining in the upper quartile of the
South African Reserve Bank's (SARB's) target range. The Finance Minister's recently revised growth forecasts for the economy is
estimated at 1.7% in 2017, up from 0.5% in the current year.

Overall, the domestic economy suggests that all corporates, consumers, investors and the public sector have had to embark on
one level of austerity exercise or another, especially following the SARB's increase in the repo rate in January 2016 and again
in March 2016. Investor and consumer confidence overall remains low, driven by political uncertainty both domestically and
internationally as world markets struggle to gauge the impact of Brexit and the recent election of a new US President.

Notwithstanding these challenges, Balwin continued to experience strong demand for its apartments during the reporting
period, driven by urbanisation, the strategic location of its developments, its value-add and competitive pricing.

The rate of construction and sales tracked against expectations during the interim reporting period. The Group currently has
14 developments under construction, with a number of first phase developments launched during the reporting.

Delays in registration
1 033 apartments were handed over to clients (H1 2016: 828). An average selling price per apartment of R991 955 
(H1 2016: R994 450) was achieved.

756 of these apartments registered during the reporting period (2016 H1: 828 apartments). Delays were experienced at:
-  Malakite (JHB East) - 89 apartments of which all apartments had transferred by October 2016
-  Amsterdam (JHB North) - 69 apartments which are in the transfer process. Purchasers have occupied the apartments and
   are paying occupational rent
-  Grove Lane (Pretoria) - 119 apartments of which all apartments had transferred by October 2016.

The impact of the delay in transfer on the Company's revenue recognition accounting estimate and consequently its profit after
tax, as well as a proposed change in the revenue recognition accounting estimate is discussed below.

Management forecasts a total of approximately 2 500 apartments to be sold and handed over for the full financial year. 
1 089 apartments (74%) of apartments targeted for completion and in the second half of the financial year have been pre-sold.

Pretoria
Grove Lane, the Company's maiden development consisting of 136 apartments in its new strategic node of Pretoria, completely
sold out during the review period. Also during the period, the first phase of the first development (The Blyde) of the larger
Riverwalk estate had been mostly sold out.

Western Cape
Construction at Balwin's development in the Western Cape, De Velde remains on track for completion in the 2017 financial
year. Two further land parcels at De Zicht in Milnerton and Paarl were acquired for a consideration of R79 million.

The Paarl land parcel measures 9,0523 hectares for which a total of 800 apartments may be constructed. The Milnerton land
parcel measures 14,3569 hectares for which an approximate 1 200 apartments may be constructed. As is common with
acquisitions of this nature, both land parcels require rezoning.

Construction during the period under review commenced at Paardevlei Square and Paardevlei Lifestyle developments in
Somerset West (Western Cape).

Johannesburg
Sales and construction remain on track in the Johannesburg nodes. In Johannesburg South, the last phase of Stanley Park is
expected to be handed over by the end of the financial year. In Johannesburg North, The Cambridge is expected to be sold out
in 2017.

Pre-sales at Balwin's much anticipated up-market development at Polo Fields, Waterfall released for sales in August, breaking
all previous records with 150 sales. The development continues to receive strong demand.

Developments under construction and secured pipeline

                                                                                                                       Total
                        Expected         Expected                                       Sold             Total     remaining
                    commencement          date of   Total units in    Registered     but not         remaining   units to be
                            date       completion      development       to date  registered  units to be sold    registered
Johannesburg North
Cambridge              Commenced           17-May              440           222         114               104           218
Kyalami Hills          Commenced        Completed              542           542           -                 -             -
The Whiskin               17-Jan           19-Apr            1 300             -           -             1 050         1 300
Amsterdam              Commenced           18-Dec            1 040             -         358               682         1 040
The William            Commenced           15-Dec              877           877           -                 -             -
Total                                                        4 199         1 641         472             2 086         2 558
Johannesburg East
Greenstone Crest       Commenced            1-Mar              620           428         189                 3           192
Greenstone Ridge       Commenced           16-Mar              986           983         983                 3             3
Malakite               Commenced           17-Jun              290           135          40               115           155
The Clulee                17-Jan           20-Dec            1 600             -           -             1 600         1 600
The Reid                  17-Jan           20-Dec            1 400             -           -             1 400         1 400
Westlake               Commenced           18-Mar              790           191         206               393           599
Total                                                        5 686         1 737       1 418             3 514         3 949
Johannesburg South
Balboa Park            Commenced           17-Jun              410           215          82               113           297
Majella Park              19-Jun           20-Jun              420             -           -               420           420
Stanley Park           Commenced           17-Aug              480           380           -                 -           100
Total                                                        1 310           595          82               533           817

                                                                                                                       Total
                           Expected      Expected                                       Sold             Total     remaining
                       commencement       date of   Total units in    Registered     but not         remaining   units to be
                               date    completion      development       to date  registered  units to be sold    registered
Pretoria
River Walk                   17-Jan        27-Dec            6 200             -          47             6 153         6 200
Grove Lane                Commenced        16-Jul              136           130           4                 2             6
Total                                                        6 336           130          51             6 155         6 206
Western Cape
De Velde                  Commenced        16-Dec            1 210         1 062          96                52           148
Paardevlei Retirement     Commenced        19-Dec              307             -          15               292           307
Paardevlei Square         Commenced        17-Mar               87             -          31                56            87
The Boulevard                16-Jan        20-Jan              360             -           -               360           360
The Sandown               Commenced        18-Mar              636            60         257               319           576
Paarl                        18-Mar        20-Mar            1 200             -           -             1 200         1 200
De Zicht                     18-Mar        20-Mar              800             -           -               800           800
Total                                                        4 600         1 122         399             3 079         3 478
Waterfall                       TBA           TBA           15 500             -         178            15 322        15 500
Total                                                       37 631         5 225       1 620            30 686        32 508

Financial review
Despite strong sales across all developments, revenue declined from R823 million to R750 million. Operating profit and profit
after tax commensurately declined to R235 million (H1 2016: R318 million) and R175 million (H1 2016: R234 million) respectively.

Impact of delay in registration on revenue
The predominant reason for the decline in profitability is due to 277 constructed and handed over apartments not transferring
during the reporting period. Balwin's current accounting estimate relating to revenue recognition is to only recognise revenue
on the registration of an apartment in the deeds office, and not on occupation.

Had these apartments transferred during the period under review, profit after tax for the period would have amounted to
R237 million.

The Company launched first phase developments at its Malakite, Grove Lane and Amsterdam sites during the reporting period.
The registration process for first phase launches are historically more protracted given the council approval process, with
secondary phases being processed relatively quicker.

Profit margin
The gross profit margin achieved for the period under review was 41.8%, an amount in excess of the 40% long-term target
margin. Management believes that the selling prices of sectional title apartments may have reached a ceiling due to the tough
market conditions. Combined with higher than expected inflationary pressures experienced on construction costs, the gross
profit margin is expected to be lower for the financial year in the range of 38%-40%.

Operating costs
The 97% increase in operating costs is greater than the increase in sales due to the Group gearing up for further expansion
and growth. The increase in operating costs is primarily due to the increase in the number of employees compared to the prior
period. The number of employees has increased by 41% to 249 (2016 H1: 176).

Other drivers of the increase are costs associated with the Waterfall transaction and consulting costs post listing. 
Marketing costs and sales commission were reclassified from cost of sales to operating expenses which further resulted 
in the increase in operating expenses.

Earnings per share and headline earnings per share
The aforementioned factors resulted in a 36% decline in earnings per share to 37 cents (2016 H1: 58 cents) and a decline in
headline earnings per share of 36% to 37 cents (2016 H1: 58 cents).

Funding structure and costs
Development finance is obtained on a phase by phase basis. The finance is ring-fenced to the specific development being
financed.

Approximately 70% of building costs are financed through development finance, with the remainder funded through retained
earnings. Balwin has access to R190 million of short-term working capital facilities.

Debt finance is obtained through Investec, Absa and Nedbank.

The Group's long-term debt to equity ratio as at the end of August was 37%, which is below the long-term target of 50%,
largely on account of the payment of various deposits in respect of the Waterfall Development. The average cost of borrowing
is 10.5% (H1 2016: 10.5%) and is unhedged.

Proposed change in revenue recognition accounting estimate
Balwin intends on changing the Company's revenue recognition accounting estimate. Currently revenue is only recognised on the 
registration of an apartment in the deeds office. Delays in registrations are outside the control of management and result in 
short-term but severe earnings volatility, as illustrated by the interim results.

In order to address this, it is proposed that the accounting estimate relating to the timing of the revenue recognition is 
amended whereby revenue is recognised at the earlier of registration in the deeds office or occupation, provided that 
guarantees are in place for the full purchase price. Risks and rewards transfer at the earlier of registration and 
occupation provided that the guarantees are in place based on the amended accounting estimate.

The Company has obtained an expert opinion with regards to compliance in this regard and intends to implement the change 
in accounting for the full year results.

The financial effects on the financial performance if the change in accounting estimate related to revenue recognition had been 
implemented during the reporting period is illustrated below:

ILLUSTRATIVE STATEMENT OF COMPREHENSIVE INCOME

                                                                         
                                                            Unaudited         Unaudited          Unaudited            Audited
                                                     Six months ended  Six months ended   Six months ended    12 months ended
                                                          August 2016       August 2016        August 2015      February 2016
                                                        (With amended 
                                                            change in                                                  
                                                           accounting                          
                                                            estimate)                            
                                                                R'000             R'000              R'000              R'000
Revenue                                                       986 635           749 918            823 405          2 083 512
Cost of sales                                               (586 163)         (435 970)          (467 068)        (1 188 400)
Gross profit                                                  400 472           313 948            356 337            895 112
Other income                                                    7 645             7 645              6 315             13 096
Operating expenses                                           (86 359)          (86 359)           (43 870)          (134 585)
Share based payment charge                                          -                 -                  -            (6 030)
Operating profit                                              321 758           235 234            318 782            767 593
Investment revenue                                              7 113             7 113              3 499             10 797
Finance costs                                                   (787)             (787)              (191)              (251)
Profit before taxation                                        328 084           241 560            322 090            778 139
Taxation                                                     (91 237)          (67 010)           (88 476)          (219 572)
Profit for the year                                           236 847           174 550            233 614            558 567
Other comprehensive income:  
Items that may be reclassified to profit or loss:  
Exchange differences on translating foreign operations          (590)             (590)                520              (603)
Total comprehensive income for the year                       236 257           173 960            234 134            557 964
Headline earnings per share                  (cents)               50                37                 58                132
Earnings per share                           (cents)               50                37                 58                132

Waterfall development rights acquisition
During the period under review, Balwin successfully concluded the Waterfall development rights acquisition with shareholder
approval obtained on 29 July 2016. The acquisition represents a milestone for the business with the expansion into one of the

highest growth nodes in South Africa. The acquisition resulted in an increase in the secured development pipeline of 15 500
apartments to provide a total secured development pipeline of 32 508 apartments.

The zoning process for Polo Fields and Kikuyu is at an advanced stage and is expected to be completed early in the next
calendar year. Pre-sales on Polo Fields are strong, with 150 apartments sold on the release of sales.

Construction of the site establishment and boundary wall at the Polo Fields at commenced. The next Waterfall development to
be released for sales is Kikuyu on the Waterfall Fields property, during the 2018 financial year.

Awards
Balwin has received the 'highly commended' award for the Africa region at the International Property Awards 2016 - 2017,
in the category 'Development - Apartment South Africa' for the Paardevlei Lifestyle Development in Somerset West (Western
Cape). The Paardevlei Lifestyle Estate is being developed within the historic core of the Paardevlei Precinct, a site rich in natural
beauty and history.

The International Property Awards are open to residential and commercial property professionals from around the world. The
awards celebrate the highest levels of achievement by companies operating in all sectors of the property and real estate industry.

Changes to the board
Post the reporting period Mr Anthony Diepenbroek and Mr Arnold Shapiro were appointed as non-executive directors to the
Board with effect from 26 October 2016.

Arnold Shapiro has over 22 years of experience in financial services and real estate. Arnold is the co-founder of Trematon
Capital Investments ("Trematon") in its current incarnation and has served as the chief executive officer of Trematon since 2005.

Prior to his current role, Arnold occupied various management positions in the asset management industry including the
positions of chief executive officer at Brait Asset Managers and Capital Alliance Asset Management.

Anthony Diepenbroek has over 20 years of experience in real estate from an investment, management and development
perspective and was previously the chief executive officer of Zendai South Africa, a subsidiary of Hong Kong Stock Exchange
Listed Zendai Properties.

Prior to this Anthony served as the chief executive officer of the property division of AECI prior to the disposal of AECI's property
assets at Modderfontein to Zendai Properties as well as serving in other senior positions at Transnet Ports Authority, Pangbourne
Properties, Asakhe Real Estate Fund and IFour Properties and iProp Properties. Anthony is also a past president of SAPOA.

Ms Basani Maluleke resigned as a non-executive director of the Board with effect from Wednesday, 26 October 2016.
The Board wishes to express its gratitude to Basani for her contribution to the Company since its listing in October 2015 and
wishes her well in her future endeavours.

Balwin's Board now constitutes three executive and five non-executive directors, of whom four are independent. Additional
independent non-executive directors' appointments are being considered and will be announced in due course.

Prospects
Management is focused on delivering sustainable, steady growth over the long term despite the tough market conditions.
Urbanisation continues to grow the population in key metropolitan areas in which the Company operates.

Continued urbanisation and a relatively low supply of affordable, high-quality sectional title estates in key nodes are expected
to underpin Balwin's long-term growth prospects. Management remains confident of the establishment of a rental model as a
key long-term objective to derive annuity income and support Balwin's growth ambitions.

Balwin's continuation of build to sell model (constructing a number of apartments across key locations at any given time)
provides the Company with several levers to rapidly adapt to prevailing market conditions and reduce risk:
-  Construction may be varied according to the rate of sales which improves cash preservation
-  Some phases may contain more two- and one-bedroom apartments to maintain sales and margins, depending on market
   demand and affordability
-  The Company's phased approach limits finance risk.

Going forward, management will continue to focus on the reduction of the working capital cycle, cash preservation and risk
management.

Innovation remains a key success factor for the Group with the launch of various unique lifestyle centres in its developments.
Management firmly believes that the unique product offering, competitive pricing and the expansion of the current geographical
footprint will support the Group in reaching its growth targets over the short to medium term.

RECONCILIATION OF HEADLINE EARNINGS
FOR THE six months ENDED 31 August 2016

                                                                              Unaudited          Unaudited            Audited
                                                                       Six months ended   Six months ended    12 months ended
                                                                              31 August          31 August        29 February
                                                                                   2016               2015               2016
Basic and headline earnings per share
Basic                                                         (cents)                37                 58                132
Headline                                                      (cents)                37                 58                131
Tangible net asset value per share                            (cents)               334                209                354
Net asset value per share                                     (cents)               334                209                354
Weighted average number of shares in issue                     ('000)           472 193            400 000            424 542
Net asset value                                               (R'000)         1 578 492            834 842          1 502 191
Reconciliation of profit for the year to headline earnings
Profit for the year                                           (R'000)           174 550            233 614            558 567
Adjusted for:
- Profit on disposal of investment property                   (R'000)                 -                  -            (1 133)
- Profit on disposal of property, plant and equipment         (R'000)             (271)                  -               (49)
Headline earnings                                             (R'000)           174 279            320 939            557 385

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 AUGUST 2016

                                                                              Unaudited          Unaudited            Audited
                                                                       Six months ended   Six months ended    12 months ended
                                                                              31 August          31 August        29 February
                                                                                   2016               2015               2016
                                                                                  R'000              R'000              R'000
Revenue                                                                         749 918            823 405          2 083 512
Cost of sales                                                                 (435 970)          (467 068)        (1 188 400)
Gross profit                                                                    313 948            356 337            895 112
Other income                                                                      7 645              6 315             13 096
Operating expenses                                                             (86 359)           (43 870)          (134 585)
Share based payment charge                                                            -                  -            (6 030)
Operating profit                                                                235 234            318 782            767 593
Investment revenue                                                                7 113              3 499             10 797
Finance costs                                                                     (787)              (191)              (251)
Profit before taxation                                                          241 560            322 090            778 139
Taxation                                                                       (67 010)           (88 476)          (219 572)
Profit for the year                                                             174 550            233 614            558 567
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations                            (590)                520              (603)
Total comprehensive income for the year                                         173 960            234 134            557 964

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE SIX MONTHS ENDED 31 AUGUST 2016

                                                                              Unaudited          Unaudited            Audited
                                                                       Six months ended   Six months ended    12 months ended
                                                                              31 August          31 August        29 February
                                                                                   2016               2015               2016
                                                                                  R'000              R'000              R'000
Assets
Non-current assets
Property, plant and equipment                                                    43 877             31 408             40 806
Investment property                                                                   -              2 739                  -
Deferred tax                                                                      5 679              1 900              5 679
Total non-current assets                                                         49 556             36 047             46 485
Current assets
Developments under construction                                               2 404 581          1 153 479          1 342 793
Loans to shareholders                                                                 -                409                  -
Trade and other receivables                                                      50 186             81 369             32 448
Other financial assets                                                            3 220             33 753              7 375
Current tax receivable                                                              418                  -                491
Cash and cash equivalents                                                       164 241            178 674            462 288
Total current assets                                                          2 622 646          1 447 684          1 845 395
Total assets                                                                  2 672 202          1 483 731          1 891 880
Equity and liabilities
Share capital                                                                   663 354                  6            661 854
Reserves                                                                        (1 423)              (917)              (834)
Retained income                                                                 916 561            835 753            841 171
Total equity                                                                  1 578 492            834 842          1 502 191
Liabilities
Non-current liabilities
Other financial liabilities                                                     589 136                  -             80 957
Current liabilities
Trade and other payables                                                         70 373             52 194             93 765
Loans from shareholders                                                               -                185                  -
Other financial liabilities                                                     423 507            513 879            161 242
Current tax payable                                                               5 435             77 981             39 801
Provisions                                                                        5 259              4 650             13 924
Total liabilities                                                             1 093 710            648 889            389 689
Total equity and liabilities                                                  2 672 202          1 483 731          1 891 880

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 AUGUST 2016

                                                                                              Foreign
                                                                                             currency
                                                                                  Share   translation   Retained        Total
                                                                                capital       reserve     income       equity
                                                                                  R'000         R'000      R'000        R'000
Balance at 1 March 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
Total comprehensive income                                                            -            83    324 953      325 036
Profit for the period                                                                 -             -    324 953      324 953
Other comprehensive income                                                            -            83          -           83
Issue of shares                                                                 661 848             -          -      661 848
Share-based payment                                                                   -             -      6 030        6 030
Dividends                                                                             -             -  (325 565)    (325 565)
Balance at 29 February 2016 (Audited)                                           661 854         (834)    841 171    1 502 191
Total comprehensive income                                                            -         (589)    174 550      173 961
Profit for the period                                                                 -             -    174 550      174 550
Other comprehensive income                                                            -         (589)          -        (589)
Issue of shares                                                                   1 500             -          -        1 500
Dividends                                                                             -             -   (99 160)     (99 160)
Balance at 31 August 2016 (Unaudited)                                           663 354       (1 423)    916 561    1 578 492

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 AUGUST 2016

                                                                            Unaudited           Unaudited             Audited
                                                                     Six months ended    Six months ended     12 months ended
                                                                            31 August           31 August         29 February
                                                                                 2016                2015                2016
                                                                                R'000               R'000               R'000
Cash flows from operating activities
Cash generated (used in) from operations                                    (873 970)           (100 012)             267 997
Interest income                                                                7 113                3 499              10 797
Finance costs                                                                   (787)               (191)               (251)
Tax paid                                                                    (101 303)            (23 760)           (197 305)
Net cash (used in) from operating activities                                (968 947)           (120 464)              81 238
Cash flows from investing activities
Purchase of property, plant and equipment                                     (6 325)             (2 707)            (15 690)
Proceeds on disposal of property, plant and equipment                             286                  42                 106
Proceeds on disposal of investment property                                         -               (350)               3 526
Net movement of financial assets                                                4 155                (81)              26 297
Net cash (used in) from investing activities                                  (1 884)             (3 096)              14 239
Cash flows from financing activities
Proceeds on share issue                                                         1 500                   -             661 848
Net movement of other financial liabilities                                   770 444             266 398             (5 282)
Net movement of shareholders' loan                                                  -                  26                   -
Dividends paid                                                               (99 160)            (94 118)           (419 683)
Net cash from financing activities                                            672 784             172 306             236 883
Total cash and cash equivalents movement for the year                       (298 047)              48 746             332 360
Cash and cash equivalents at the beginning of the year                        462 288             129 928             129 928
Total cash and cash equivalents at the end of the year                        164 241             178 674             462 288

SEGMENTAL ANALYSIS
FOR THE SIX MONTHS ENDED 31 AUGUST 2016


                                                                              Unaudited          Unaudited            Audited
                                                                       Six months ended   Six months ended    12 months ended
                                                                              31 August          31 August        29 February
                                                                                   2016               2015               2016
                                                                                  R'000              R'000              R'000
UNITED KINGDOM
Segmental statement of financial position
Assets
Property, plant and equipment                                                         -                809                  -
Investment property                                                                   -              2 739                  -
Developments under construction                                                       -                  -                  -
Trade and other receivables                                                           -                  -                445
Other financial assets                                                                -                  -                  -
Cash and cash equivalents                                                         2 917              1 064              3 224
Investments                                                                           -                  -                  -
Liabilities
Trade and other payables                                                             19                176                145
Other financial liabilities                                                           -                  -                  -
Loans from shareholders                                                               -                  -                  -
Segmental statement of comprehensive income
Revenue                                                                               -                  -                  -
Cost of sales                                                                        24                  2                  -
Operating expenses                                                                   34                521              1 458

                                                                               Unaudited          Unaudited           Audited
                                                                        Six months ended   Six months ended   12 months ended
                                                                               31 August          31 August       29 February
                                                                                    2016               2015              2016
                                                                                   R'000              R'000             R'000
SOUTH AFRICA
Segmental statement of financial position
Assets
Property, plant and equipment                                                    43 877             30 599             40 806
Investment property                                                                   -                  -                  -
Developments under construction                                               2 404 581          1 153 479          1 342 793
Trade and other receivables                                                      50 186             81 398             32 003
Other financial assets                                                            3 220             33 753              7 375
Cash and cash equivalents                                                       164 241            177 610            459 065
Investments                                                                         100                100                100
Liabilities
Trade and other payables                                                         70 373             52 019             93 620
Other financial liabilities                                                   1 012 643                  -            242 199
Loans from shareholders                                                               -                185                  -
Segmental statement of comprehensive income
Revenue                                                                         749 918            823 405          2 083 512
Cost of sales                                                                   435 970            467 066          1 188 400
Operating expenses                                                               86 359             43 348            133 127

NOTES TO THE CONDENSED CONSOLIDATED STATEMENTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2016

1. Basis of preparation
   The unaudited summarised consolidated interim financial results have been prepared in accordance with the JSE Listing Requirements and the
   Companies Act, 2008 of South Africa and the framework concepts and the measurement and recognition requirement's of IFRS and the SAICA
   Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
   Standards Council and must also as a minimum contain the information required by IAS 34: Interim Financial Reporting. They have 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 29 February 2016.

   The unaudited consolidated interim financial results have not been reviewed or audited by the Group's external auditors.

2. Exchange rates
   The following exchange rates were used in foreign interest and foreign transactions during the periods:
                                                                                31 August          31 August      29 February
   Rand/British Pound                                                                2016               2015             2016
   Closing rate                                                                     18.95              20.44            17.92
   Average rate                                                                     20.57              18.85            17.86

3. Subsequent events
   Mr Arnold Shapiro and Mr Anthony Diepenbroek have been appointed as non-executive directors of the Balwin board of directors with effect from
   26 October 2016.

   Basani Maluleke has resigned as a non-executive director of the Balwin board of directors with effect from 26 October 2016.

4. Interim dividend
   Notice is hereby given that the directors have declared a gross dividend of 11.08975 cents per ordinary share, payable out of the income reserves
   for the period ended 31 August 2016 to shareholders in accordance with the timetable below.
                                                                                                                         2016
   Declared                                                                                                       15 November
   Cum dividend                                                                                                    6 December
   Ex dividend                                                                                                     7 December
   Record date                                                                                                     9 December
   Payment date                                                                                                   12 December

   Dividends tax amounting to 1.66346 cents per ordinary share will be withheld in terms of the Income Tax Act. Ordinary shareholders who are
   not exempt from dividends tax will therefore receive a net dividend of 9.42629 cents per ordinary share net of dividends tax. The Company has
   472 192 592 ordinary shares in issue. Balwin's income tax reference number is 9058216848.

   Share certificates may not be dematerialised or rematerialised between Wednesday, 7 December and Friday 9 December, both days inclusive.

                                                                                                          Number of    Number of
                                                                                                             shares       shares
                                                                                                               2016         2015
5. Stated capital/share capital
   Authorised
   Ordinary shares                                                                                    1 000 000 000        5 800
   Issued
   Ordinary shares                                                                                      469 662 237        5 800
   The unissued shares are under the control of the directors until the next annual general meeting.
   Reconciliation of shares in issue:
   Opening balance                                                                                      469 662 237        5 800
   Movement                                                                                                       -            -
   Closing balance                                                                                      469 662 237        5 800

                                                                                 Unaudited          Unaudited            Audited
                                                                          Six months ended   Six months ended    12 months ended
                                                                                 31 August          31 August        29 February
                                                                                      2016               2015               2016
                                                                                     R'000              R'000              R'000

6. Related party disclosure
   Related party balances
   Loan accounts - Owing by related parties
   Slade Properties Proprietary Limited                                                  -                  -                 83
   RN Gray                                                                               -                  -                445
   Related party transactions
   Sale of units to related parties
   SV Brookes                                                                            -             16 496             84 422
   RN Gray                                                                               -                  -             31 373
   J Weltman                                                                             -                  -              1 046
   U Gschnaidtner                                                                   10 932                  -             10 458
   Rent paid to related parties
   SV Bookes                                                                           303                  -                  -
   Purchases from related parties
   Friedshelf 966 Proprietary Limited                                                    -                  -             38 760
   Management fee from related parties
   SV Brookes                                                                          178                  -                  -
   RN Gray                                                                              43                  -                  -
   J Weltman                                                                             3                  -                  -
   U Gschnaidtner                                                                        9                  -                  -
   Compensation to directors and other key management
   Directors' emoluments                                                             8 120             12 698             21 509

7. Fair value information
   Fair value hierarchy
   The different levels are defined as follows:
   Level 1: Quoted unadjusted prices in active markets for identical assets or liabilities that the Group can access at measurement date.
   Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
   Level 3: Unobservable inputs for the asset or liability.

   No changes have been made to the valuation technique.

   The fair values of financial instruments that are not traded in an active market are determined using standard valuation techniques. These valuation
   techniques maximise the use of observable market data were available and rely as little as possible on company specific estimates.

   The fair values disclosed for the financial assets and financial liabilities are classified in Level 3 of the financial instrument hierarchy have been
   assessed to approximate their carrying amounts.

   There were no transfers between Levels 1, 2 and 3 during the year.

                                                                                 Unaudited          Unaudited            Audited
                                                                          Six months ended   Six months ended    12 months ended
                                                                                 31 August          31 August        29 February
                                                                                      2016               2015               2016
                                                                                     R'000              R'000              R'000

8. Financial instruments
   Loans and receivables
   Other receivables                                                                43 382             69 975             32 004
   Cash and cash equivalents                                                       164 241            178 674            462 288
   Other financial assets                                                            3 220             33 753              7 375
   Loans to shareholders                                                                 -                409                445
   Financial liabilities at amortised cost
   Other financial liabilities                                                   1 012 643            513 879            242 199
   Trade and other payables                                                         70 373             52 194             63 419
   Loans from shareholders                                                               -                185                  -

9. Board of directors
   The following changes to the board of directors were effected during the reporting period:
   -   Basani Maluleke resigned as a director effective 26 October 2016.
   -   Arnold Shapiro was appointed as a non-executive director effective 26 October 2016.
   -   Anthony Diepenbroek was appointed as an independent non-executive director effective 26 October 2016.

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. These are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995.
Words 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.

CORPORATE INFORMATION

Registered office
Block 1, Townsend Office Park
1 Townsend Avenue
Bedfordview
Private Bag X4, Gardenview, 2047
Telephone: 011 450 2818

Directors                                      Sponsor
H Saven (Chairperson)*#                        Investec Bank Limited
SV Brookes (Chief Executive Officer)
J Weltman (Financial Director)
R Gray (Managing Director)
A Shapiro*#                                    Transfer secretary
JAA Diepenbroek*#                              Computershare Investor Services Proprietary Limited
KW Mzondeki*#                                  (Registration number 2004/003647/07)
R Zekry#                                       70 Marshall Street, Johannesburg, 2001
* Independent                                  (PO Box 61051, Marshalltown, 2107)
# Non-executive  
                                               www.balwin.co.za
                                               Johannesburg, 15 November 2016
Company secretary
JUBA Statutory Services Proprietary Limited 




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