Wrap Text
Voluntary pre-close update and trading update for the period ending 28 February 2017
BALWIN PROPERTIES LIMITED
(previously Balwin Properties Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/028851/06)
Share code: BWN
ISIN: ZAE000209532
("Balwin" or "the Company")
VOLUNTARY PRE-CLOSE OPERATIONAL UPDATE FOR THE SIX MONTH PERIOD ENDING 28 FEBRUARY
2017 AND TRADING UPDATE FOR THE TWELVE MONTH PERIOD ENDING 28 FEBRUARY 2017
Pre-close Operational Update
Balwin continued to experience strong demand for its apartments despite a challenging macro-
economic environment which has been characterised by rising inflation, low investor confidence and
lower than expected GDP growth. Balwin’s robust demand has been driven by the company’s niche,
high-quality product offering in strategic locations, sustained urbanisation rates and competitive
pricing.
Regional Overview
Johannesburg
Greenstone Crest is mostly sold out and Malakite is now the last of Balwin’s developments in
the Greenstone node. All of the Malakite apartments which had experienced delays in
registration as at 31 August 2016, were registered by October 2016. The Cambridge is mostly
sold out with just 20 apartments remaining, which are expected to be sold out during the 2018
financial year. Sales at the Amsterdam and Westlake developments have been exceptional
with greater than 30 pre-sales recorded per month on average versus a long term average
pre-sales of 20-25. Construction of the Whiskin and The Reid is pending completion of the
zoning process which is expected to be completed within the 2018 financial year. Both
developments are expected to be launched for sales during the 2018 financial year. The
registration process for the Amsterdam apartments which experienced delays as at 31 August
2016, is anticipated to be completed shortly after the financial year end as the apartments are
expected to be lodged at the deeds office during March 2017. All of these apartments had
been occupied with guarantees in place and are therefore included in the 2017 financial year
end numbers, in line with the new revenue recognition policy.
Western Cape
Construction at De Velde, the first of Balwin’s developments in the Western Cape, is complete
with only 10 apartments unsold. The development is expected to be sold out within the first
quarter of the 2018 financial year. Sales at The Sandown, in the Milnerton node, have been
exceptional with pre-sales exceeding 30 apartments per month versus a long term average
pre-sales of 20-25. Construction of the Paardevlei Square lifestyle and duplex apartments
commenced during the period under review and is progressing well. The Boulevard is
expected to be launched for sales within the 2018 financial year and the De Zicht land parcel
is currently being zoned to specification with construction anticipated to begin in the 2018
financial year.
Waterfall
The Polo Fields, the first of Balwin’s developments in the Waterfall area, was successfully
launched in February 2017 and has received significant interest to date, with pre-sales
totalling in excess of 240 apartments during the six months ended 28 February 2017.
Construction of phase one had commenced and hand-overs are expected to commence in the
first half of the 2018 financial year, once proclamation as a township is received (which is
currently expected to be received during April 2017). Kikuyu, the first development in
Waterfall Fields (Balwin’s second development in the Waterfall area) is planned to commence
pre-sales during the first quarter of the 2018 financial year, after which proclamation is
expected to be received during September 2017.
Pretoria
All of the Grove Lane apartments which had experienced delays in registration as at 31 August
2016, were registered during October 2016. Construction at River Walk in Pretoria East is
expected to commence in the 2018 financial year. The Blyde, the first development in the
River Walk estate, will comprise approximately 3,200 apartments and is planned to be the first
development in sub-saharan Africa to feature a Crystal Lagoon (as outlined in more detail in
Balwin’s results presentation for the six months ended 31 August 2016).
KwaZulu-Natal
In line with Balwin’s stated strategy to expand into new growth nodes, Balwin has identified
the potential acquisition of a land parcel in the Ballito area, which would accommodate
approximately 2,500 apartments. In order to effectively manage the expansion into KwaZulu-
Natal, Balwin has signed an offer to purchase for a regional office in Umhlanga and has
appointed Anthony Diepenbroek as general manager of the region.
Trading update
Revenue for the reporting period is expected to be higher than that of the same period in the prior
financial year, driven primarily by an increase in the demand for the unique, high-quality product.
Approximately 2,600 apartments with guarantees are expected to be handed over by period end, with
approximately 2,200 of those expected to have been registered at this time. The expected increase in
revenue takes into account the newly adopted revenue recognition policy, which recognises revenue
on the earlier of the registration in the deeds office or occupation with guarantees in place.
The average selling price per apartment is expected to be approximately R1 million, while operating
expenses are expected to be lower than in the comparative period, as a result of a reallocation
adjustment in terms of which construction-related payroll costs have been reallocated from operating
expenses to cost of sales. Accordingly, the gross profit margin is expected to be between 36%-38% for
the financial year. The effective tax rate is expected to be between 27%-29%.
Profit for the year is expected to end higher than that for the corresponding reporting period, driven
by an increase in the total number of apartments sold. Cash available at period-end is anticipated to
be approximately R400 million, with the long-term debt to equity ratio expected to be in line with that
reported as at 31 August 2016.
The expected headline earnings per share and earnings per share figures are as follows:
Year ended Year ended % change Pre-listing % change
28 February 28 February statement
2017 2016 forecast
(cents) (cents) (cents)
Headline Earnings 136-141 131 3.8% - 7.6% 148 (8.1%) - (4.7%)
per Share
Earnings per Share 136-141 132 3.0% - 6.8% 148 (8.1%) - (4.7%)
Other information
- The weighted average number of shares for the financial year ending 28 February 2017 is 472,192,592
(diluted: 472,192,592) versus 424,541,867 (diluted: 427,072,222) for the year ending 29 February
2016; and
- Balwin UK has been dormant for the period under review.
Annual results release
Balwin expects to announce its annual results for the year ending 28 February 2017 on or about 16
May 2017.
The information contained in this update has not been reviewed or reported on by Balwin’s auditors.
Bedfordview
23 February 2017
Sponsor: Investec Bank Limited
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