BALWIN PROPERTIES LIMITED - Interim results for the six months ended 31 August 2017

Release Date: 20/11/2017 07:05
Code(s): BWN
 
Wrap Text
Interim results for the six months ended 31 August 2017

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 2017

HIGHLIGHTS

19% UP 
Revenue

5% down
Basic and headline earnings per share

7% down
Profit for the period

29% up
Net asset value per share

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 turnkey development and sale of
sectional-title apartments as well as surrounding infrastructure, in the mid to upper market segment.

Estates typically consist of between 500 and 1 500 sectional title residential apartments and are located in high-density, high-
growth nodes across key metropolitan areas in Johannesburg, Pretoria, the Western Cape and KwaZulu-Natal. The Group has
a secured pipeline of 35 595 apartments across 24 locations in key target nodes with a 10 to 12-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 R699 999 to R1 799 000
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. Balwin also develops and maintains control
over certain surrounding infrastructure such as fibre networks, storage, schools and solar energy solutions from which it derives
annuity income.

Strategy

Balwin's core strategy is to deliver sustainable long-term returns to shareholders through its unique business model. The
Company re-invests profit after tax to support the long-term growth of the business while maintaining dividend distributions
in line with the target dividend policy.

Balwin's current strategy rests on four key elements:

-  Core business
   The core business focuses on providing a quality product to the middle-income population at an affordable price. Balwin
   benefits from economies of scale, in-house construction and management whilst retaining flexibility throughout individual
   phases of large developments.

-  Upmarket developments
   To support the core business model, Balwin continually tailors its developments to match market demands, offering
   innovations in lifestyle and convenience. Upmarket developments in select nodes, where higher selling prices can be
   achieved (R1 499 000 to R2 999 000), form part of this approach.

-  Rent to buy developments in partnership with property funds
   Balwin takes responsibility for the design and construction of developments for rental purposes. Balwin will market and
   secure lease agreements for the apartments with prospective tenants before selling them on to property funds in phases.

-  Annuity income
   A new business segment launched from the existing asset base to generate annuity income, including through partnerships
   to implement solar energy solutions, the leasing of education facilities to experienced and robust operators, storage
   solutions and fibre infrastructure within the Balwin estates.

OPERATING MODEL

Balwin operates a build-to-sell model, currently developing and selling between 2 000 and 3 500 sectional-title residential
apartments per year. The Group has the ability to increase this capacity to approximately 5 000 sectional-title residential
apartments per year, based on its existing infrastructure and development pipeline. The Company also generates additional
annuity income through the management and ownership of infrastructure surrounding its developments.

Key aspects of the operating model

-  Keeping a constant rate of construction (continuous development) subject to demand - to retain contractors, maintain
   quality and support the build to sell model

-  Insource all critical aspects of Balwin's build to sell model to contain costs and control output; including through in-house
   centralised procurement and quantity surveying departments

-  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 key nodes in Johannesburg north, south and east as well as Pretoria, the Western Cape and KwaZulu-Natal; ensuring
   that revenue streams and demand is not concentrated but rather diversified across various nodes

Continuous development approach

Balwin follows a continuous development approach. Its success is based on:

-  selling 20 to 25 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 35% 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. Recently, Balwin established centralised
procurement and quantity surveying departments to ensure that it leverages its scale optimally across all developments.

Key differentiators

Key differentiators in Balwin's build-to-sell model include 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

Balwin continued to perform well and execute on its unique and innovative business model in a tough operating environment.
Demand for the product remained strong and sales have tracked in line with expectations which resulted in good top line
growth.

The slightly lower sales volumes achieved compared to the prior corresponding period is a function of fewer developments
coming to market for sales due to the delays experienced in obtaining certain council approvals for The Blyde, The Whisken, The
Reid and Ballito Hills which resulted in construction delays and therefore the handing over of an anticipated 300 apartments to
clients. This negatively impacted the financial performance of the business due to the timing difference of the registrations taking
place against initial timelines. Good progress has been made since the period-end regarding the approvals and construction is
on track.

In addition, the large number of early stage developments currently underway required the Company to invest extensively on
civils and infrastructure works ahead of the construction of apartments starting across these new suburbs. Balwin currently has
three large-scale developments requiring this investment.

Significant progress was made on the Waterfall properties with all regulatory approvals obtained for The Polo Fields development
on which phase 1 and 2 were handed over in July 2017. Sales at the Kikuyu development have also been outstanding with
the first two phases handing over in November 2017. A total of 643 sales were achieved across the Waterfall developments.

During the period, Balwin established its office in Umhlanga which earmarks the penetration of Balwin into KwaZulu-Natal.
Ballito Hills is the first development in the region. The development launched for sales with more than 150 sales achieved to
date and the first phase expected to be registered early in the 2019 financial year.

Balwin Fibre, a new subsidiary launched during the period, will own all Fibre infrastructure across Balwin estates going forward
with the aim of becoming a large standalone fibre network operator in South Africa.

Balwin is also celebrating its 21st birthday in 2017 and ran a promotion in partnership with radio station 947 and gave away
an apartment at the Westlake eco estate in Modderfontein. The winner, Kgoshi Maupa, will also be involved with the Balwin
Foundation.

The Balwin Foundation

Living our commitment as an invested corporate citizen of South Africa. Balwin Properties Limited has established the Balwin
Foundation NPC to support and empower our younger generation and previously disadvantaged to gain greater knowledge
and skills through technical vocational education and training. Students, employees and contractors are trained in a building
industry-related trade which includes tiling, painting, plastering, bricklaying and carpentry, of which all skills are strategically
identified as an integral part to the success of the company. The Balwin Foundation has successfully trained 100 previously
disadvantaged individuals and has funded seven university students through our bursary programme to date.

FINANCIAL PERFORMANCE

During the reporting period, revenue increased by 19% compared to the prior year as a result of the higher selling prices at our
upmarket developments. The average selling price per unit was R1 218 088 (2016: R991 551) which represents an increase of
23%. This increase is as a result of the sales of 107 apartments in the Polo Fields and 24 apartments in Paardevlei Square with
an average selling price of R1 807 973 and R2 415 847 respectively being handed over to clients during the reporting period.
The increase in the average selling price is also due to more two- and three-bedroom apartments being handed over. The
average selling price is expected to remain flat due to the tough economic conditions currently being experienced in the market.

Gross profit margin

The gross profit margin achieved for the period was 32.4% compared to 41.8% in the prior comparative period. This is due
to the large number of early stage developments currently under way. The gross profit margin of a project increases across
the life of a project with the lowest at the start and the highest at the end. The business is targeting a gross profit margin of
between 35% and 40% through the entire lifecycle of a project, with typically higher margins being achieved on Gauteng-
based projects.

Balwin has centralised its procurement processes with the establishment of a new procurement department which has already
unlocked significant cost savings.

Operating expenses

Operating expenses declined by 13% compared to the prior period due to the reclassification of labour related payroll costs
from operating expenses to cost of sales. Additional costs linked to the opening of the KwaZulu-Natal office were incurred in
the period. The new centralised procurement department is expected to result in significant reduction in overheads and efficient
cost management.

Earnings per share and headline earnings per share

Earnings per share and headline earnings per share both declined by 5% to 35 cents from 37 cents (H1: FY17) for the 
reporting period.

Funding structure and costs

Development finance is obtained on a phase by phase basis. The development finance is secured against the pre-sales of
the specific phase being financed. Development finance is obtained at a loan to value of 70% with the remainder of the
construction costs financed through equity.

Finance is currently obtained through South Africa's major banks including Investec, Nedbank and Absa.

The group's long-term debt to equity ratio as at the end of the reporting period was 29% compared to 37% in the prior
corresponding period.

Dividend

A dividend of 10 cents per share has been declared, in line with the board's dividend policy of distributing 30% of after-tax
profit to shareholders.

CHANGES TO THE BOARD

During the reporting period, Mr Tomi Amosun and Ms Thoko Mokgosi-Mwantembe were appointed to the board as independent
non-executive directors on 16 May 2017.

The board now comprises three executive directors, one non-executive director and five independent non-executive directors.

Prospects

Management is focused on the long-term growth of the business through the delivery of an innovative lifestyle product to the
South African market. Continued urbanisation and the growth of the South African middle-class will increase the demand for
affordable high-quality sectional title apartments whilst there is a relatively low supply by property developers.

Great focus is being placed on operational performance and execution across all developments, especially during the initial
phases. Careful capital allocation and cautious cash flow management remain priorities. The team is also implementing
initiatives to adjust the configuration of apartment blocks, the pace of development and the pricing points to address market
dynamics and maintain healthy level of sales.

Significant progress has been made regarding regulatory approvals and the management team is working closely with the
authorities to resolve any outstanding issues. The delays at The Blyde, The Whisken, The Reid and Ballito Hills are expected to be
resolved with sales on these developments coming on stream in the 2019 financial year. Furthermore, all new land acquisitions
are now done on the basis that all regulatory approvals have been secured.

Management is also focusing on delivering on its rental model through strategic alliances such as the one announced with
Transcend in August. Going forward, the Company will also seek to acquire zoned land on which repayments can be made on
registrations.

The increased scale brought about by the new developments, the delayed projects coming on stream, costs controls, operational
efficiencies and the benefit of new annuity income initiatives such as fibre, solar energy solutions, storage and education will
support the company's performance.

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          Completed             440           427           11                 2            13
The Whiskin                      Commenced         April 2019           1 350             0          190             1 160         1 350
Amsterdam                        Commenced      December 2019           1 040           450          144               446           590
Kamasi                          March 2018                TBC           1 764             0            0             1 764         1 764
Total                                                                   4 594           877          345             3 372         3 717
Johannesburg East
Malakite                         Commenced          Completed             290           256           29                 5            34
Green Lee                       March 2018      December 2020           1 600             0            0             1 600         1 600
The Reid                        March 2018      December 2020           1 400             0            0             1 400         1 400
Westlake                         Commenced         March 2018           1 010           382           98               530           628
Green Park                       Commenced                TBC           1 200             0            0             1 200         1 200
Total                                                                   5 500           638          127              4 735        3 662
Johannesburg South
Balboa Park                      Commenced          Completed             410           358           18                34            52
Majella Park                     June 2019          June 2021             420             0            0               420           420
Glenvista                              TBC                TBC             900             0            0               900           900
Total                                                                   1 730           358           18             1 354         1 372
Pretoria
The Blyde                        Commenced      December 2020           3 200             0            0             3 200         3 200
Green Creek                     March 2018                TBC           1 712             0            0             1 712         1 712
Green Wood                      March 2019                TBC           1 712             0            0             1 712         1 712
Total                                                                   6 624             0            0             6 624         6 624

                                                                                                                                   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
Western Cape
Paardevlei Retirement             Commenced     December 2019              307             0          25               282           307
Paardevlei Square                 Commenced         June 2018               87            24          13                50            63
The Jade                          Commenced      January 2020              360             0         165               195           360
The Sandown                       Commenced        March 2018              636           322         172               142           314
Paarl                            March 2019        March 2021            1 200             0           0             1 200         1 200
De Zicht                          Commenced        March 2020              876             0          93               783           876
Total                                                                     3466           346         468             2 652         3 120
Waterfall
Polo Fields                       Commenced               TBA            1 500             0         347             1 153         1 500
Waterfall Fields                  Commenced               TBA            5 230             0           0             5 230         5 230
Kikuyu                            Commenced               TBA            1 270             0         256             1 014         1 270
Waterfall Ridge                         TBA               TBA            7 500             0           0             7 500         7 500
Total                                                                   15 500             0         603            14 897        15 500
KwaZulu-Natal
Ballito Hills                     Commenced               TBA            1 600             0         128             1 472         1 600
Total                                                                    1 600             0         128             1 472         1 600
Grand total                                                             39 014         2 219       1 689            35 106        35 595

RECONCILIATION OF HEADLINE EARNINGS
FOR THE SIX MONTHS ENDED 31 AUGUST 2017
                                                                                         Unaudited          Unaudited            Audited
                                                                                  Six months ended   Six months ended    12 months ended
                                                                                         31 August          31 August        28 February
                                                                                              2017               2016               2017
Basic and headline earnings per share
Basic                                                                    (cents)                35                 37                141
Headline                                                                 (cents)                35                 37                140
Tangible net asset value per share                                       (cents)               432                334                429
Net asset value per share                                                (cents)               432                334                429
Weighted average number of shares in issue                                ('000)           469 818            472 193            469 818
Net asset value                                                          (R'000)         2 030 893          1 578 492          2 013 509
Reconciliation of profit for the year to headline earnings
Profit for the year                                                      (R'000)           163 078            174 550            660 344
Adjusted for:
- Profit on disposal of property, plant and equipment                    (R'000)              (17)              (271)              (277)
Headline earnings                                                        (R'000)           163 061            174 279            660 067

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 AUGUST 2017
                                                                                         Unaudited          Unaudited            Audited
                                                                                  Six months ended   Six months ended    12 months ended
                                                                                         31 August          31 August        28 February
                                                                                              2017               2016               2017
                                                                                             R'000              R'000              R'000
Revenue                                                                                    894 077            749 918          2 702 153
Cost of sales                                                                            (604 226)          (435 970)        (1 691 129)
Gross profit                                                                               289 851            313 948          1 011 024
Other income                                                                                 2 162              7 645             22 459
Operating expenses                                                                        (75 238)           (86 359)          (130 144)
Operating profit                                                                           216 775            235 234            903 339
Investment revenue                                                                          10 416              7 113             15 221
Finance costs                                                                                (419)              (787)            (1 375)
Profit before taxation                                                                     226 772            241 560            917 185
Taxation                                                                                  (63 694)           (67 010)          (256 444)
Profit for the year                                                                        163 078            174 550            660 741
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations                                         686              (590)              (397)
Total comprehensive income for the year                                                    163 764            173 960            660 344

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 AUGUST 2017
                                                                                         Unaudited          Unaudited            Audited
                                                                                  Six months ended   Six months ended    12 months ended
                                                                                         31 August          31 August        28 February
                                                                                              2017               2016               2017
                                                                                             R'000              R'000              R'000
ASSETS
Non-current assets
Property, plant and equipment                                                               52 116             43 877             43 180
Deferred tax                                                                                 4 862              5 679              4 862
Total non-current assets                                                                    56 978             49 556             48 042
Current assets
Developments under construction                                                          2 413 677          2 404 581          2 011 324
Trade and other receivables                                                                307 830             50 186            633 852
Other financial assets                                                                       8 601              3 220             30 129
Current tax receivable                                                                      60 241                418                358
Cash and cash equivalents                                                                  266 671            164 241            546 969
Total current assets                                                                     3 057 020          2 622 646          3 222 632
Total assets                                                                             3 113 998          2 672 202          3 270 674
Equity and liabilities
Share capital                                                                              664 354            663 354            664 354
Reserves                                                                                     (545)            (1 423)            (1 231)
Retained income                                                                          1 367 084            916 561          1 350 386
Total equity                                                                             2 030 893          1 578 492          2 013 509
LIABILITIES
Non-current liabilities
Other financial liabilities                                                                583 992            589 136            610 677
Current liabilities
Trade and other payables                                                                   102 522             70 373            137 457
Other financial liabilities                                                                389 528            423 507            490 203
Current tax payable                                                                              2              5 435              4 562
Provisions                                                                                   7 061              5 259             14 266
Total liabilities                                                                        1 083 105          1 093 710          1 257 165
Total equity and liabilities                                                             3 113 998          2 672 202          3 270 674

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 AUGUST 2017
                                                                                                        Foreign
                                                                                                       currency
                                                                                           Share    translation   Retained         Total
                                                                                         capital        reserve     income        equity
                                                                                           R'000          R'000      R'000         R'000
Balance at 1 March 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
Total comprehensive income                                                                     -            192    486 191       486 383
Profit for the period                                                                                              486 191       486 191
Other comprehensive income                                                                                  192                      192
Issue of shares                                                                            1 000                                   1 000
Dividends                                                                                      -                  (52 366)      (52 366)
Balance at 28 February 2017 (Audited)                                                    664 354        (1 231)  1 350 386     2 013 509
Total comprehensive income                                                                                  686    163 078       163 764
Profit for the period                                                                                              163 078       163 078
Other comprehensive income                                                                                  686                      686
Issue of shares
Dividends                                                                                                        (146 380)     (146 380)
Balance at 31 August 2017 (Unaudited)                                                    664 354          (545)  1 367 084     2 030 893

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 AUGUST 2017
                                                                                         Unaudited          Unaudited            Audited
                                                                                  Six months ended   Six months ended    12 months ended
                                                                                         31 August          31 August        29 February
                                                                                              2017               2016               2017
                                                                                             R'000              R'000              R'000
Cash flows from operating activities
Cash generated from/(used in) operations                                                   103 868          (873 970)          (316 600)
Interest income                                                                             10 416              7 113             15 221
Finance costs                                                                                (419)              (787)            (1 375)
Tax paid                                                                                 (128 136)          (101 303)          (290 733)
Net cash used in operating activities                                                     (14 271)          (968 947)          (593 487)
Cash flows from investing activities
Purchase of property, plant and equipment                                                 (13 849)            (6 325)            (9 045)
Proceeds on disposal of property, plant and equipment                                           34                286                311
Net movement of financial assets                                                            21 528              4 155           (22 753)
Net cash from/(used in) investing activities                                                 7 713            (1 884)           (31 487)
Cash flows from financing activities
Proceeds on share issue                                                                          -              1 500              2 500
Net movement of other financial liabilities                                              (127 360)            770 444            852 681
Dividends paid                                                                           (146 380)           (99 160)          (151 526)
Net cash (used in)/from financing activities                                             (273 740)            672 784            709 655
Total cash and cash equivalents movement for the year                                    (280 298)          (298 047)             84 681
Cash and cash equivalents at the beginning of the year                                     546 969            462 288            462 288
Total cash and cash equivalents at end of the year                                 266 671            164 241            546 969

SEGMENTAL ANALYSIS
FOR THE SIX MONTHS ENDED 31 AUGUST 2017
                                                                                         Unaudited          Unaudited            Audited
                                                                                  Six months ended   Six months ended    12 months ended
                                                                                         31 August          31 August        28 February
                                                                                              2017               2016               2017
                                                                                             R'000              R'000              R'000
UNITED KINGDOM
Segmental statement of financial position
Assets
Cash and cash equivalents                                                                    2 873              2 917              2 539
Liabilities
Trade and other payables                                                                        17                 19                 89
Segmental statement of comprehensive income
Cost of sales                                                                                    -                 24                  -
Operating expenses                                                                             639                 34                840
SOUTH AFRICA
Segmental statement of financial position
Assets
Property, plant and equipment                                                               52 116             43 877             43 180
Developments under construction                                                          2 413 677          2 404 581          2 011 324
Trade and other receivables                                                                307 830             50 186            633 852
Other financial assets                                                                       8 601              3 220             30 129
Cash and cash equivalents                                                                  263 798            161 241            544 430
Investments                                                                                    100                100                100
Liabilities
Trade and other payables                                                                   102 505             70 373            137 368
Other financial liabilities                                                                973 520          1 012 643          1 100 881
Segmental statement of comprehensive income
Revenue                                                                                    894 077            749 918          2 702 153
Cost of sales                                                                              604 226            435 970          1 691 129
Operating expenses                                                                          74 599             86 359            129 304

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

1. Basis of preparation
   The unaudited condensed consolidated interim financial statements 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, the JSE
   Listings Requirements and the Companies Act, 2008 (No 71 of 2008) as amended. 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 at 28 February 2017.

   The unaudited condensed consolidated interim financial statements have been externally prepared under the supervision of J Weltman, in his
   capacity as Chief Financial Officer.

   The interim unaudited condensed consolidated financial statements have not been reviewed or audited by Deloitte & Touche, 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         28 February
   Rand/British Pound                                                                        2017               2016                2017
   Closing rate                                                                             16.75              18.95               16.23
   Average rate                                                                              16.8              20.57                  19

3. Subsequent events
   During the period under review, Mr Tomi Amosun and Ms Thoko Mokgosi-Mwantembe were appointed as independent non-executive directors
   with effect from 16 May 2017.

4. Interim dividend
   Notice is hereby given that the Board have declared a gross dividend of 10 cents per ordinary share, payable out of the income reserves for the period
   ended 31 August 2017 to shareholders in accordance with the timetable below.
                                                                                                                                    Date
   Declared                                                                                                     Monday, 20 November 2017
   Cum dividend                                                                                                Tuesday, 12 December 2017
   Ex dividend                                                                                               Wednesday, 13 December 2017
   Record date                                                                                                  Friday, 15 December 2017
   Payment date                                                                                                 Monday, 18 December 2017
  
   Dividends tax amounting to 2 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 8 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.

   The Board is considering a distribution re-investment alternative in which a shareholder would be entitled to re-invest the cash distribution in return
   for shares in the Company, failing which they will receive the cash distribution in respect of all or part of their shareholding.

   A further announcement will be made in this regard on/before Tuesday, 28 November 2017.

                                                                                                      Number of shares  Number of shares
                                                                                                                  2017              2016
5. Share capital
   Authorised
   Ordinary shares                                                                                       1 000 000 000     1 000 000 000
   Issued
   Ordinary shares                                                                                         469 662 237       469 662 237
   The unissued shares are under the control of the directors until the next annual general meeting.
   Reconciliation of shares in issue:
   Opening balance
   Movement
   Closing balance                                                                                         469 662 237       469 662 237

                                                                                         Unaudited          Unaudited            Audited
                                                                                  Six months ended   Six months ended    12 months ended
                                                                                         31 August          31 August        28 February
                                                                                              2017               2016               2017
                                                                                             R'000              R'000              R'000
6. Related party disclosure
   Related party balances
   Related party transactions
   Sale of units to related parties
   SV Brookes                                                                               23 769                  -            182 330
   RN Gray                                                                                   9 122                  -             43 955
   U Gschnaidtner                                                                                -             10 932             10 932
   ML Brookes                                                                                    -                  -              2 149
   S Brookes                                                                                     -                  -                710
   Rent paid to related parties
   SV Brookes                                                                                  187                303                934
   ML Brookes                                                                                  154                  -                  -
   Management fee from related parties
   SV Brookes                                                                                  176                178                359
   RN Gray                                                                                      46                 43                 87
   U Gschnaidtner                                                                                9                  9                 20
   J Weltman                                                                                     2                  3                  6
   Compensation to directors and other key management
   Directors emoluments                                                                     28 224              8 120             29 302

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          28 February
                                                                                          2017                 2016                 2017
                                                                                         R'000                R'000                R'000
8. Financial instruments
   Loans and receivables
   Other receivables                                                                   307 829               43 382              633 852
   Cash and cash equivalents                                                           266 671              164 241              546 969
   Other financial assets                                                                8 601                3 220               30 129
   Financial liabilities at amortised cost
   Other financial liabilities                                                         973 520            1 012 643            1 100 881
   Trade and other payables                                                             71 296               70 373               48 833

9. Board of directors
   The following changes to the board of directors were effected during the reporting period:

   - Mr Tomi Amosun was appointed as an independent non-executive director on 16 May 2017
   - Ms Thoko Mokgosi-Mwantembe was appointed as an independent non-executive director on 16 May 2017

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

BALWIN PROPERTIES LIMITED                      Registered office
Incorporated in the Republic of South Africa   Block 1, Townsend Office Park
Registration number 2003/028851/06             1 Townsend Avenue
Share code: BWN                                Bedfordview
ISIN: ZAE000209532                             Private Bag X4, Gardenview, 2047
("Balwin" or "the Company")                    Telephone: 011 450 2818

Directors                                      Sponsor
H Saven (Chairperson)*#                        Investec Bank Limited
SV Brookes (Chief Executive Officer)
J Weltman (Chief Financial Officer)            Transfer secretary
R Gray (Managing Director)                     Computershare Investor Services Proprietary Limited
A Shapiro*#                                    (Registration number 2004/003647/07)
O Amosun*#                                     70 Marshall Street, Johannesburg, 2001
KW Mzondeki*#                                  (PO Box 61051, Marshalltown, 2107)
T Mokgosi-Mwantembe*#                          
R Zekry#                                       www.balwin.co.za
                                               
* Independent                                  20 November 2017
# Non-executive                                

Company secretary
JUBA Statutory Services



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