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BALWIN PROPERTIES LIMITED - Audited provisional summarised results for the year ended 28 February 2019

Release Date: 15/05/2019 07:05
Code(s): BWN     PDF:  
 
Wrap Text
Audited provisional summarised results for the year ended 28 February 2019

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

Audited Provisional SUMMARISED RESULTS 
FOR THE YEAR ENDED 28 FEBRUARY 2019

Highlights

6% increase in REVENUE

8% decrease in EARNINGS PER SHARE

15% increase in NET ASSET VALUE PER SHARE

8% decrease in PROFIT FOR THE YEAR

8% decrease in HEADLINE EARNINGS PER SHARE

49% decrease in DIVIDENDS

Commentary

CORPORATE OVERVIEW
Balwin Properties is a specialist, national residential property developer of
large-scale, sectional title estates for South Africa's growing low-to-middle
income population, with a focus on high quality, affordable apartments with
an innovative lifestyle offering for clients.

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, Tshwane, the Western Cape and KwaZulu-
Natal. The group has a secure pipeline of 28 419 apartments across 23 developments
in key target nodes with an approximate eight-year development horizon.

Balwin estates offer secure, affordable, high-quality, environmentally friendly
and conveniently located one-, two-, and three-bedroom apartments, ranging
in size from 33m2 to 120m2. Prices range from R599 900 to R1 999 900 per
apartment within the core 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.

Lifestyle centres are an integral part of the larger estate developments with
facilities offered as all-inclusive value-added services. These lifestyle centres
typically include free Wi-Fi, a wellness spa, restaurant, gym, squash court,
running track, action sports field, games room, cinema room, swimming pools,
playgrounds, laundromat and a concierge.

Business model
Balwin's business model comprises four key elements:

-   Core business model
    The core business focuses on providing a quality, affordable build-to-sell
    product. Balwin benefits from economies of scale, in-house construction
    and management while retaining flexibility throughout individual phases
    of large developments. Estates are developed on a phase-by-phase basis
    and the dynamic nature of the product enables Balwin to change the
    block design configuration in response to changing market conditions
    and customer demands.

-   Elite model developments
    Balwin's portfolio incorporates two elite developments, being The
    Polo Fields (Waterfall) and Paardevlei Lifestyle Estate (Somerset West).
    These apartments are built to higher specifications and achieve selling prices
    from R1 999 900 to R2 999 900. Built on existing land in selected nodes,
    the elite developments follow the standard phase-by-phase approach used
    in all Balwin developments.

-   Purpose-built product for sale to property funds
    Balwin takes responsibility for the design and construction of developments
    that are purpose-built for sale to large-scale residential property funds, such
    as Balwin Rentals Proprietary Limited. Balwin will market and secure lease
    agreements for the apartments with prospective tenants before selling
    them on to investors in line with the existing proven model of a phase-by-
    phase approach. These apartments will have a distinctive architecture that
    is different to Balwin's core business model, yet will remain synonymous
    with Balwin quality.

    Monthly lease rentals range from R5 100 to R9 500 and provide tenants
    access to the lifestyle features associated with the Balwin brand, including
    the lifestyle centre, gym, restaurants and concierge.

-   Annuity income
    While Balwin expects to generate annuity income from the purpose-built
    developments for sale to property funds over time, the business also
    produces annuity income by leveraging its asset base and expanding its
    service offering to home owners. Partnerships have been established to
    provide high-speed fibre connectivity in Balwin estates as well as solar
    installations which generate renewable energy. The annuity business is
    complementary to Balwin's business model and enhances the lifestyle
    offering to customers, with limited additional construction costs required
    to generate annuity returns.

OPERATIONAL REVIEW
Balwin continued to experience strong demand for its lifestyle apartments for
the year ended 28 February 2019, despite ongoing economic headwinds and
sustained consumer pressure. Key focus areas for the year under review were
operational performance, cash preservation and executing on the existing
development pipeline, with pleasing results being achieved.

Balwin recognised in revenue 2 437 apartments during the reporting period.
This included 2 281 build-to-sell apartments (2018: 2 084 apartments) while
156 of the newly introduced purpose-built apartments were sold to Balwin
Rentals Proprietary Limited ("Balwin Rentals"), a residential property fund,
in the current year. This demonstrates the consistent demand for Balwin's high
quality, affordable apartments and innovative lifestyle product offering to the
South African market.

The rate of sales across the developments was in line with management's
expectations. However, exceptional sales continue to be recorded at The Blyde
(Tshwane East) and Ballito Hills (Ballito), with sales rates significantly exceeding
the development average of approximately 25 apartments per month. The
success at The Blyde can largely be attributed to the opening of the Crystal
Lagoon during the year, the first of its kind in sub-Saharan Africa. Conversely,
the sales rate at the Balwin elite model developments, namely The Polo Fields
(Waterfall) and Paardevlei Lifestyle Estate (Somerset West) continue to be below
the sales rate of the core business model developments due to the current
challenging economic conditions. The group does not plan to build any further
elite developments once the existing developments have been completed.

Balwin continues to be adversely affected from a cash flow perspective by
council delays which prevents the timeous registration of apartments, a common
occurrence in the industry. As a result of these delays, the group was unable
to register 864 apartments by year-end. By the end of April 2019, only 66
apartments had not been registered and are expected to lodge and register
imminently. The majority of the unregistered apartments at year-end related
to the initial phases at The Reid and The Whisken developments which have
subsequently been registered.

A total of 1 224 apartments have been pre-sold for the 2020 financial year
and not recorded in revenue in the current financial year.

Demand for one- and two-bedroom apartments remained strong. As highlighted
in the interim results in October 2018, the group proactively adapted its
apartment mix and block configuration during the year, introducing more
affordable one-bedroom, one-bathroom and two-bedroom, two-bathroom
apartments to satisfy the changing market demand.

Balwin successfully implemented one of its strategic objectives by introducing
a purpose-built product for sale to a large-scale residential property fund. In
addition to complementing the existing business model, this product will allow
Balwin to utilise and unlock its existing land bank at a faster rate. In the current
year, Balwin concluded the sale and registration of 156 apartments to Balwin
Rentals, a strategic alliance partner, for a total consideration of R85.6 million.
A further 96 apartments were sold to Balwin Rentals but have not yet registered
and will be recognised in revenue in the 2020 financial year.

Balwin also entered into a right of first refusal agreement granting Balwin
Rentals the right to acquire 4 544 residential apartments on existing land
parcels of Balwin. Balwin holds a 25% share in Balwin Rentals and expects to
derive annuity income over time through its share of profit in this investment.
Giving consideration to the existing right of first refusal agreement, the board
will consider each transaction to ensure that it is the most favourable to the
group and its shareholders.

The first rental development launched to the market is Greenpark in Boksburg.
Three further rental developments, all under the 'Green' brand, are planned
for Gauteng, totalling over 6 000 apartments.

The group is currently developing 11 estates. The majority of these developments
are at an early stage and require extensive investment in civils and infrastructure
works.

The group is actively monitoring the land reform policy and is taking the
necessary actions to ensure that its secured pipeline of property developments
is not negatively impacted.

Management remains committed to delivering annuity income to its shareholders
through the fibre, solar and rental businesses and remains alert to other annuity
type business opportunities that are complementary to the existing business.

ACHIEVEMENTS
The exceptional quality of the developments and the creative design of the Balwin
product was recognised at the recent Africa and Arabia Property Awards where
Balwin received four awards in the categories of "Apartment, For South Africa"
for its Ballito Hills development (Ballito), "Leisure Architecture" and "Leisure
development for South Africa" for The Blyde development (Tshwane East) and
"Developer website for South Africa" for the Balwin website.

BALWIN FOUNDATION
Living our commitment as an invested corporate citizen of South Africa, the
Balwin Foundation NPC supports and empowers the younger generation and
previously disadvantaged individuals to gain greater knowledge and skills through
technical vocational education and training. Students, employees, contractors and
unemployed community members are trained in building industry-related trades
which include tiling, painting, plastering and bricklaying as well as managing
construction resources, all skills which are key to the success of the business.
In addition, the Foundation offers courses in computer operations, financial
management and time management.

Balwin Properties donates funds from the sale of each apartment to the Foundation
which has successfully trained over 300 previously disadvantaged individuals and
has funded 16 tertiary students and two scholars through its bursary programme.

FINANCIAL PERFORMANCE
Revenue
An increase in the number of apartments recognised in the current financial year
contributed to revenue growth of 6% over the prior year. The average selling price
per apartment reduced in line with expectations to R1 069 462 (2018: R1 177 848)
owing to a different product mix as well as the inclusion of the revenue from the
apartments sold to Balwin Rentals which return a lower selling price than the core
business model apartments. The average selling price is expected to continue
to decrease in the upcoming financial year due to an increase in the number of
apartments sold to Balwin Rentals or another residential property fund that is
expected to be included in the financial results.

Gross profit
The gross profit margin for the year was 30.1%. Although this represents an
increase from the 27.3% reported for the interim period, the margin has decreased
from 32.8% in the previous financial year.

The reduction in the margin resulted from a number of factors, including:

-   the increase in the VAT rate from 14% to 15%, effective from April 2018,
    was absorbed into the selling prices of Balwin apartments;
-   an increase in the mix of apartments from the Western Cape that derive a
    lower gross margin;
-   the mix of sales includes a large number of early stage developments which
    traditionally return a lower gross margin; and
-   the inclusion of the revenue recognised from the sale of the apartments to
    Balwin Rentals which returned a lower margin than the group's targeted
    gross profit margin.

Management remains confident that the gross profit margin of the build-to-sell
model will improve as the current early stage developments mature. This trend
is expected to continue in the upcoming financial year. This is due to the proven
formulae whereby the phase-by-phase growth in the selling price exceeds the
development costs. This is evidenced by the improvement in the gross margin
in the second half of the year. The business continues to target a gross profit
margin of approximately 35% through the lifecycle of a project, with typically
higher margins being achieved on Gauteng-based projects. Shareholders should
note that the revenue from the inclusion of the apartment sales to residential
property funds will be margin dilutive as this product returns a lower margin than
the group targeted gross profit margin.

Cost management and improved efficiencies have remained important focus
areas and the integration of the centralised procurement system introduced last
year has been completed.

Operating expenses
Operating expenses grew by R32.8 million to R173.8 million. The increase
reflects the inclusion of R9.9 million operating costs of Balwin Fibre Proprietary
Limited for a full period compared to costs of R1.5 million in the prior year
while the subsidiary was in its start-up phase. The majority of these costs
pertain to core network operating costs. In addition, employee-related costs
increased by R23.1 million owing to growth in total headcount, the provision
for executive bonuses in accordance with the remuneration policy as well as
the growth in the management team. Apart from these increases, operating
expenses have remained largely flat from the prior year.

The management and containment of overhead costs remains a focus area
for the upcoming financial year.

Earnings per share and headline earnings per share
Earnings per share and headline earnings per share both decreased by 8% to
96 cents (2018: 104 cents), in line with the group's voluntary business and
trading update issued on 14 March 2019.

Developments under construction
Developments under construction, including the value of land, land contribution
costs and development costs, increased by R455.8 million to R3.04 billion.
Land costs account for 35.7% of the value of work in progress. Management
are focused on delivering on the existing development pipeline and were able
to reduce this pipeline by exiting its position on certain pieces of land during
the current year as part of the active management of the developments under
construction, an ongoing focus area for management. Apart from limited
key strategic opportunities, management does not intend on expanding on
its pipeline in the current financial year.

Cash resources, funding structure and costs
The group has made pleasing progress in the management and utilisation of cash,
with cash resources at year end improving to R329.4 million from R100.0 million
in the previous year. Cash management and preservation remain key focus areas
for the upcoming financial year.

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

Land funding is obtained from major financial institutions at a range of 50% to
70% of the cost of the land.

The group's long-term debt-to-equity ratio at the end of the reporting period
was 23% compared to 25% in the prior corresponding period.

A focus area for management in the current year will be sourcing funding of
infrastructure costs that will assist in unlocking the development value.

Dividend
Notice is hereby given that the board have declared a final gross dividend of
14.51 cents per ordinary share, payable out of income reserves for the year ended
28 February 2019 to ordinary shareholders in accordance with the timetable below:

Declared                                                  Wednesday, 15 May 2019
Cum dividend                                               Tuesday, 11 June 2019
Ex dividend                                              Wednesday, 12 June 2019
Record date                                                 Friday, 14 June 2019
Payment date                                               Tuesday, 18 June 2019

Dividend tax amounting to 2.902 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 dividend of 11.608 cents 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, 12 June 2019 and
Friday, 14 June 2019, both days inclusive.

Prospects
Management remains optimistic on the business' medium- to long-term
prospects and believes the group is well-positioned to remain resilient in the
current economic climate.

Continued urbanisation and the growth of the South African middle-class
will continue to support the demand for affordable high-quality sectional title
apartments.

Balwin is confident in its ability to deliver growth in the sale of the purpose-
built product for sale to large residential property investors which maximises
wealth for shareholders.

The group remains committed to growing revenue and profitability through
its annuity income businesses.

Balwin remains committed to its unique lifestyle offering and the opportunity to
expand on its partnership with Crystal Lagoon to bring the beach life to clients.

Pipeline
                                                                                                                                 Total  
                                  Expected        Expected                   Total                                 Total    apartments   
                              commencement         date of              apartments       Total        Total   apartments  sold but not       Total  
                                   date of   completion of   Status             in  apartments   apartments   recognised    recognised      unsold     Balwin
                              construction    construction      (*)    development        sold   registered   in revenue    in revenue  apartments   pipeline
JOHANNESBURG                                                                                                                                                      
Waterfall                                                                                                                                                         
Kikuyu                           Commenced        Mar 2022        A          1 270         696          483          515           181         574        755   
The Polofields                   Commenced        Jun 2023        A          1 512         583          548          505            78         929      1 007   
Munyaka                                TBC             TBC        I          5 020           -            -            -             -       5 020      5 020   
Total                                                                        7 802       1 279        1 031        1 020           259       6 523      6 782   
Johannesburg East                                                                                                                                               
The Reid                         Commenced        May 2022        A          1 294         237            -          190            47       1 057      1 104   
Westlake                         Commenced        Complete        C            820         820          820          820             -           -          -   
Westlake 2                             TBC             TBC        I            312           -            -            -             -         312        312   
Total                                                                        2 426       1 057          820        1 010            47       1 369      1 416   
Johannesburg North                                                                                                                                              
Amsterdam                        Commenced        Aug 2019        A          1 040         720          705          706            14         320        334   
The Whisken                      Commenced        Jun 2022        A          1 490         422            -          338            84       1 068      1 152   
Total                                                                        2 530       1 142          705        1 044            98       1 388      1 486   
Johannesburg South                                                                                                                                              
Majella Park                           TBC             TBC        I            280           -            -            -             -         280        280   
Total                                                                          280           -            -            -             -         280        280   
KwaZulu-Natal                                                                                                                                                   
Ballito Hills                    Commenced        Jan 2024        A          1 320         398            -           61           337         922      1 259   
Ballito Creek                          TBC             TBC        I          1 872           -            -            -             -       1 872      1 872   
Marshall Dam                           TBC             TBC        I          1 092           -            -            -             -       1 092      1 092   
Total                                                                        4 284         398            -           61           337       3 886      4 223   


                                                                                                                                 Total  
                                  Expected        Expected                   Total                                 Total    apartments   
                              commencement         date of              apartments       Total        Total   apartments  sold but not       Total  
                                   date of   completion of   Status             in  apartments   apartments   recognised    recognised      unsold     Balwin
                              construction    construction      (*)    development        sold   registered   in revenue    in revenue  apartments   pipeline
Tshwane                                                                                                                    
The Blyde                        Commenced        Nov 2027        A          3 580         552          280          401           151       3 028      3 179   
Total                                                                        3 580         552          280          401           151       3 028      3 179   
Western Gape                                                                                                                                                    
De Zicht                         Commenced        Jul 2020        A            876         451          263          339           112         425        537   
Paardevlei Lifestyle Estate      Commenced        Feb 2022        A            342         124           91           97            27         218        245   
Paardevlei Square                Commenced        Complete        C             87          81           68           74             7           6         13   
The Jade                         Commenced        Sep 2019        A            432         336          245          247            89          96        185   
The Sandown                      Commenced        Complete        C            636         636          634          635             1           -          1   
The Huntsman                      Jun 2019        Oct 2023        I          1 044           -            -            -             -       1 044      1 044   
Gordons Bay                            TBC             TBC        I          1 272           -            -            -             -       1 272      1 272   
Fynbos                                 TBC             TBC        I          1 116           -            -            -             -       1 116      1 116   
Paarl                                  TBC             TBC        I            336           -            -            -             -         336        336   
Total                                                                        6 141       1 628        1 301        1 392           236       4 513      4 749   
Developments for sale to 
property funds                                                                                       
Greenlee                          May 2019        Aug 2023        I          1 728           -            -            -             -       1 728      1 728   
Greenpark                        Commenced        May 2022        A          1 200         240          144          144            96         960      1 056   
Greencreek                        Jun 2019        Jun 2025        I          1 760           -            -            -             -       1 760      1 760   
Greenwood                         Jul 2025        Jul 2031        I          1 760           -            -            -             -       1 760      1 760   
Total                                                                        6 448         240          144          144            96       6 208      6 304   
Grand Total                                                                 33 491       6 296        4 281        5 072         1 224      27 195     28 419   

* A - active; I - inactive; C - complete
Note that the group pipeline has not been audited.

Reconciliation of HEADLINE EARNINGS                                                                                                                             
FOR THE YEAR ENDED 28 FEBRUARY 2019                                                                                                                           
                                                                                                                                 Audited             Audited
                                                                                                                               12 months           12 months
                                                                                                                                   ended               ended
                                                                                                                        28 February 2019    28 February 2018   
Basic and headline earnings per share                                                                                                                           
Basic                                                                                                           (cents)            95.82              104.56   
Headline                                                                                                        (cents)            95.84              104.56   
Diluted earnings                                                                                                (cents)            95.80              104.06   
Diluted headlines earnings                                                                                      (cents)            95.83              104.05   
Tangible net asset value per share                                                                              (cents)           567.51              491.98   
Net asset value per share                                                                                       (cents)           567.51              491.98   
Weighted average number of shares in issue                                                                       ('000)          472 105             469 915   
Net asset value                                                                                                 (R'000)        2 653 856           2 311 906   
Reconcilliation of profit for the year to headline earnings                                                                                                     
Profit for the year                                                                                             (R'000)          452 383             491 345   
Adjusted for:                                                                                                                                                  
- Loss/(profit) on disposal of property, plant and equipment                                                    (R'000)              101                (15)   
Headline earnings                                                                                               (R'000)          452 484             491 330   
Weighted average number of shares
Weighted average number of shares in issue                                                                       ('000)          472 105             469 915   
Potential dilutive impact of share options                                                                       ('000)               88               2 278   
                                                                                                                 ('000)          472 193             472 193   

Summarised Consolidated Statement of
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 FEBRUARY 2019
                                                                                                                                 Audited             Audited
                                                                                                                               12 months           12 months
                                                                                                                                   ended               ended
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
Revenue                                                                                                                        2 613 905           2 454 635   
Cost of sales                                                                                                                (1 826 024)         (1 649 406)   
Gross profit                                                                                                                     787 881             805 229   
Other income                                                                                                                      16 002               6 587   
Operating expenses                                                                                                             (173 808)           (140 995)   
Operating profit                                                                                                                 630 075             670 821   
Interest income                                                                                                                    4 590              15 273   
Finance costs                                                                                                                    (6 176)             (3 559)   
Profit before taxation                                                                                                           628 489             682 535   
Taxation                                                                                                                       (176 106)           (191 190)   
Profit for the year                                                                                                              452 383             491 345   
Exchange profit on translating foreign operation                                                                                     103                 651   
Total comprehensive income for the year                                                                                          452 486             491 996   
Basic and diluted earnings per share                                                                                                                          
Basic (cents)                                                                                                                      95.82              104.56   
Diluted (cents)                                                                                                                    95.80              104.06   


Summarised Consolidated Statement of FINANCIAL POSITION
AS AT 28 FEBRUARY 2019
                                                                                                                                 Audited             Audited
                                                                                                                               12 months           12 months
                                                                                                                                   ended               ended
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
Assets
Non-current assets
Property, plant and equipment                                                                                                     89 486              73 214
Intangible assets                                                                                                                  6 125                  31
Investment in associate                                                                                                                1                   -
Deferred taxation                                                                                                                  5 573               1 540
                                                                                                                                 101 185              74 785
Current assets
Developments under construction                                                                                                3 042 919           2 587 088
Inventories                                                                                                                            -               1 384
Loans to related parties                                                                                                           9 981                   -
Trade and other receivables                                                                                                      913 194             859 408
Development loans receivable                                                                                                       3 450               3 858
Current tax receivable                                                                                                                 -               4 566
Cash and cash equivalents                                                                                                        329 382             100 033
                                                                                                                               4 298 926           3 556 337
Total assets                                                                                                                   4 400 111           3 631 122
Equity and liabilities
Equity
Share capital                                                                                                                    652 978             664 354
Foreign currency translation reserve                                                                                               (477)               (580)
Share-based payment reserve                                                                                                            *                   -
Retained income                                                                                                                2 001 355           1 648 132
Non-current liabilities
Development loans and facilities                                                                                                 375 473             579 628
Current liabilities
Development loans and facilities                                                                                               1 148 208             672 050
Trade and other payables                                                                                                          91 062              63 771
Contract liability                                                                                                                91 344                   -
Current tax payable                                                                                                               30 181                   2
Provisions                                                                                                                         9 987               3 765
Total liabilities                                                                                                              1 746 255           1 319 216

Total equity and liabilities                                                                                                   4 400 111           3 631 122
* Denotes a value of less than R1 000.

Summarised Consolidated Statement of CASH FLOWS
FOR THE YEAR ENDED 28 FEBRUARY 2019
                                                                                                                                 Audited             Audited
                                                                                                                               12 months           12 months
                                                                                                                                   ended               ended
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
Cash flows from operating activities                                                            
Cash generated from/(used in) operations                                                                                         285 417           (129 913)   
Interest received                                                                                                                  4 590              15 273   
Finance costs paid                                                                                                              (43 443)            (78 962)   
Taxation paid                                                                                                                  (145 394)           (196 636)   
Net cash generated from/(used in) operating activities                                                                           101 170           (390 238)   
Cash flows from investing activities                                                                                                                            
Purchase of property, plant and equipment                                                                                       (29 050)            (40 182)   
Proceeds on sale of property, plant and equipment                                                                                     57                  45   
Purchase of intangible assets                                                                                                    (6 097)                (31)   
Loans advanced to related parties                                                                                                (9 981)                   -   
Movement in development loans receivable                                                                                             408              26 271   
Associate acquired                                                                                                                   (1)                   -   
Net cash used in investing activities                                                                                           (44 664)            (13 897)   
Cash flows from financing activities                                                                                                                             
Development loans repaid                                                                                                     (1 108 495)           (939 838)   
Development loans raised and utilised                                                                                          1 254 398           1 090 636   
Investment loan and general banking facilities raised and utilised                                                               126 100                   -   
Dividends paid                                                                                                                  (99 160)           (193 599)   
Net cash generated from/(used in) financing activities                                                                           172 843            (42 801)   
Total cash and cash equivalents movement for the year                                                                            229 349           (446 936)   
Cash and cash equivalents at the beginning of the year                                                                           100 033             546 969   
Cash and cash equivalents at end of the year                                                                                     329 382             100 033   


Summarised Consolidated Statement of CHANGES IN EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2019


                                                                                                        Foreign
                                                                                                       currency
                                                                                                    translation    Share-based      Retained
                                                                                    Share capital       reserve        payment        income    Total equity
                                                                                            R'000         R'000        reserve         R'000           R'000
                            
Balance at 1 March 2017                                                                   664 354       (1 231)              -     1 350 386       2 013 509   
Profit for the year                                                                             -             -              -       491 345         491 345   
Other comprehensive income                                                                      -           651              -             -             651   
Total comprehensive income for the year                                                         -           651              -       491 345         491 996   
Dividends paid                                                                                  -             -              -     (193 599)       (193 599)   
Balance at 1 March 2018                                                                   664 354         (580)              -     1 648 132       2 311 906   
Profit for the year                                                                             -             -              -       452 383         452 383   
Other comprehensive income                                                                      -           103              -             -             103   
Total comprehensive income for the year                                                         -           103              -       452 383         452 486   
Recognition of share-based payment reserve                                                      -             -              *             -               *   
Treasury shares acquired                                                                 (11 376)             -              -             -        (11 376)   
Dividends paid                                                                                  -             -              -      (99 160)        (99 160)   
Balance at 28 February 2019                                                               652 978         (477)              *     2 001 355       2 653 856                               

* Denotes a value of less than R1 000.

Notes to the SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2019

1. Basis of preparation
   The audited summarised consolidated financial statements have been prepared in accordance with the JSE Listings Requirements and the Companies
   Act 2008 of South Africa.

   The JSE Listings Requirements require the provisional results to be prepared in accordance with the framework concepts and the measurement
   and recognition requirements of International Financial Reporting Standards ("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 also as a minimum
   contains 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 Rands rounded to the nearest R'000, which is the group's
   functional and presentation currency.

   The audited consolidated financial statements and the unmodified opinion from which these summarised consolidated financial statements were
   derived from are available at our registered office, Block 1, Townsend Office Park, 1 Townsend Avenue, Bedfordview, Johannesburg at no charge.
   
   The accounting policies are in terms of IFRS. The accounting policies are consistent to those of the prior year annual consolidated financial statements,
   except for the new accounting policies applied in the current year. The application of the new accounting policies had no impact on the consolidated
   financial statements.

   The audited summarised consolidated provisional statements and annual consolidated financial statements have been externally prepared under the
   supervision of J Weltman, in his capacity as Chief Financial Officer and were approved by the Board on 14 May 2019.

   The summarised consolidated provisional financial statements have been audited by Deloitte & Touche, the external auditor, who issued an unmodified
   ISA 810 opinion. The ISA 810 opinion and the audit report on the consolidated financial statements are available for inspection at Balwin's registered
   office. The auditor's report does not necessarily report on all the information contained in the announcement/financial results. Shareholders are
   therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's
   report together with the accompanying financial information from Balwin's registered office. Forward-looking statements are not reported on by
   the external auditors.


                                                                                                                                 Audited             Audited
                                                                                                                               12 months           12 months
                                                                                                                                   ended               ended
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
2. Revenue
   Revenue from sale of apartments                                                                                             2 598 944           2 449 942
   Donations                                                                                                                       3 348                   -
   Bond commission                                                                                                                 7 334               4 463
   Rental of electronic communication                                                                                              4 279                 230
                                                                                                                               2 613 905           2 454 635


                                                                                                                           Audited as at       Audited as at
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
3. Developments under construction and inventories
   Developments under construction                                                                                             3 042 919           2 587 088
   Merchandise                                                                                                                         -               1 384
                                                                                                                               3 042 919           2 588 472
   Developments under construction include the following:
   Costs of construction                                                                                                       1 106 277             891 888
   Land and land contribution costs                                                                                            1 086 425             888 499
   Development rights                                                                                                            850 217             806 701
                                                                                                                               3 042 919           2 587 088

   Development rights pertains to the rights assigned to Balwin Properties including all the rights to use the Polo Fields and the Waterfall Fields properties for the
   purpose of undertaking the developments.

   The cost of developments under construction recognised as an expense during the current year was R1 826.0 million (2018: R1 649.4 million). Costs previously
   capitalised to developments under construction to the value of R5.8 million were written off in the current year (2018: Rnil).

   A mortgage bond is in place over certain portions of land which acts as security for the development loans advanced. At year end, the following mortgage
   bonds were registered:
                                                                                                                                 Audited             Audited
                                                                                                                                value of            value of
                                                                                                                           mortgage bond       mortgage bond
                                                                                                                                    2019                2018
   Land                                                                                                                            R'000               R'000
   Remaining Extent of Portion 14 Farm 197 Olivedale                                                                             200 000             200 000   
   Erf 20252 Somerset West                                                                                                       200 000             300 000   
   Retention of a first covering notarial deed of lease over Portion 822 (a portion of portion 62) of the                        400 000             400 000   
   Farm Waterval                                                                                                                                               
   Remaining Extent of Portion 6 and Portion 241 of Farm Zwartkoppies No. 364 JR                                                 300 000             200 000   
   Portion 837 (a portion of portion 1) of the Farm Waterval 5 IR                                                                200 000             200 000   
   Erf 2 Richmond Park; Remaining Extent of Erf 36555 Milnerton and Erf 38435 Milnerton                                          200 000             200 000   
   Holdings 92, 102, 103, 104, 105 and 106 Crowthorne Agricultural Holdings, City of Johannesburg                                187 256             187 256   
   Remaining extent of Holding 20, Holdings 28, 29, 30, 31, 32, 33, 35, 36, 37 and 38 Linbro Park                                183 536             183 536   
   Agricultural Holdings                                                                                                                                       
   Erven 19311, 19312, 19314, 19468 and Erf 19533 Somerset West                                                                  200 000                   -   
   Portion 1 of Holding 20, Holdings 21, 22, 23, 24, 25, 26, 27; Holding 34, Linbro Park                                         224 385                   -   
   Agricultural Holdings                                                                                                                                       
   Portion 1 of Erf 4484 Ballitoville, Kwadukuza                                                                                 190 579                   -   
   Sections 26 to 36, 60 to 64, 66 to 67, 74 to 78 Paardevlei Square, Somerset West, City of Cape Town,                           35 788                   -   
   Division Stellenbosch                                                                                                       


4. Share capital                 
                                                                                                                                 Audited             Audited
                                                                                                                        Number of shares    Number of shares
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                    '000                '000
   Authorised
   Ordinary shares                                                                                                             1 000 000           1 000 000


                                                                                                                                 Audited             Audited
                                                                                                                                   as at               as at
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
   Issued and fully paid up
   Ordinary shares                                                                                                               652 978             664 354

   The unlisted shares are under the control of the directors until the next annual general meeting.
                                                                                                                                 Audited             Audited
                                                                                                                        Number of shares    Number of shares
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                    '000                '000
   Reconcilliation of shares in issue
   Opening balance                                                                                                               469 915             469 915
   Treasury shares converted                                                                                                       2 227                   -
   Shares bought back and held in treasury                                                                                       (4 510)                   -
   Closing balance                                                                                                               467 632             469 915

                                                                                                                           Audited as at       Audited as at
                                                                                                                        28 February 2019    28 February 2018
                                                                                                                                   R'000               R'000
5. Development loans
   Held at amortised cost
   Development loans                                                                                                           1 397 581           1 251 678
   General banking facility                                                                                                       75 000                   -
   Investment loan facility                                                                                                       51 100                   -
                                                                                                                               1 523 681           1 251 678


                                                                                                                                               Audited as at
                                                                  Average nominal                                                           28 February 2019
   Development loans                                              interest rate %             Maturity date                                            R'000
   Non-current loans
   Portimix Proprietary Limited                                   8.00                        Between June 2020 and June 2025                        375 473
   Current loans
   ABSA Bank Limited                                              10.25                       Between March 2019 and February 2020                   554 563
   Nedbank Limited                                                10.25                       Between March 2019 and February 2020                   218 566
   Investec Bank Limited                                          10.00 - 10.25               Between March 2019 and February 2020                   218 196
   Portimix Proprietary Limited                                   8.00                        June 2019                                               30 783
                                                                                                                                                   1 022 108
                                                                                                                                                   1 397 581
   Investment loan and general
   banking facilities
   Current loans
   Nedbank Limited                                                9.50                        March 2019                                              75 000
   Absa Bank Limited                                              10.25                       April 2019                                              51 100
                                                                                                                                                     126 100

                                                                                                                                               Audited as at
                                                                  Average nominal                                                           28 February 2018
   Development loans                                              interest rate %             Maturity date                                            R'000
   Non-current loans
   Portimix Proprietary Limited                                   8.00                        Between June 2019 and June 2025                        453 165
   ABSA Bank Limited                                              10.25                       Between March 2019 and August 2019                     126 463
                                                                                                                                                     579 628
   Current loans
   Nedbank Limited                                                10.25                       Between March 2018 and February 2019                   359 501
   Investec Bank Limited                                          10.00 - 10.25               Between March 2018 and February 2019                   208 106
   Portimix Proprietary Limited                                   10.50                       June 2018                                               54 283
   ABSA Bank Limited                                              10.00 - 10.25               August 2018                                             50 160
                                                                                                                                                     672 050
                                                                                                                                                   1 251 678

                                                                                                                         Audited as at         Audited as at
                                                                                                                      28 February 2019      28 February 2018
                                                                                                                                 R'000                 R'000
   Non-current liabilities
   At amortised cost                                                                                                           375 473               579 628
   Current liabilities
   At amortised cost                                                                                                         1 148 208               672 050
                                                                                                                             1 523 681             1 251 678
   Fair value of the financial liabilities carried at amortised cost
   Development loans                                                                                                         1 397 581             1 251 678
   Investment loan and general banking facilities                                                                              126 100                     -
                                                                                                                             1 523 681             1 251 678

   Development loans include funding provided for top-structure funding as well as land loans. Top-structure funding payable to the financial institutions is
   secured by a pre-defined level of pre-sold apartments for which financial guarantees are in place. Land loans are secured by bonds registered over the land.
   
   The development loans payable to Portimix Proprietary Limited pertain to the development rights agreement for the property. The loans reflect the discounted
   contractual cash flows and have been discounted at the average lending rate of the group at inception of the transaction.
   
   Investment loan and general banking facilities pertain to short-term bridging loan facilities.


6. Related party disclosure
                                                                                                                         Audited as at         Audited as at
                                                                                                                      28 February 2019      28 February 2018
                                                                                                                                 R'000                 R'000
   Related party balances
   Loan accounts owing by related parties
   Balwin Rentals Proprietary Limited                                                                                            9 981                     -

   Related party transactions
   Sale of apartments to related parties
   SV Brookes*                                                                                                                       -               141 189
   RN Gray*                                                                                                                          -                54 119
   Volker Properties Proprietery Limited*@                                                                                       9 391                44 056
   ML Brookes#                                                                                                                       -                 9 947
   S Brookes*#                                                                                                                   1 511                 2 612
   J Weltman*                                                                                                                      629                 1 333
   Balwin Rentals Proprietary Limited                                                                                           85 588                     -
   Rent paid to related parties
   SV Brookes                                                                                                                    1 635                   763
   Volker Properties Proprietary Limited@                                                                                          252                     -
   Management fee from related parties
   SV Brookes                                                                                                                        -                   176
   RN Gray                                                                                                                         129                   119
   U Gschnaidtner                                                                                                                   29                    22
   J Weltman                                                                                                                         6                     4
   Balwin Rentals Proprietary Limited                                                                                               69                     -
   Purchases from a director and shareholder
   SV Brookes                                                                                                                        -                10 600
   Malewell Investment Proprietery Limited                                                                                           -                 5 000
   Compensation to directors and other key management
   Directors emoluments                                                                                                         33 968                39 396
   
   *   Certain of the above transactions were purchased under the group's staff discount policy.
   @   The entity is controlled by SV Brookes.
   #   Child/spouse of SV Brookes.


7. Financial instruments
                                                                                                                               Audited               Audited
                                                                                                                                 as at                 as at
                                                                                                                      28 February 2019      28 February 2018
                                                                                                                                 R'000                 R'000
   Financial assets at amortised cost
   Trade and other receivables                                                                                                 912 119               856 024
   Cash and cash equivalents                                                                                                   329 382               100 033
   Development loans receivable                                                                                                  3 450                 3 858
   Loans to related parties                                                                                                      9 981                     -
   Financial liabilities at amortised cost
   Development loans                                                                                                       (1 523 681)           (1 251 678)
   Trade and other payables                                                                                                   (79 195)              (63 771)
   Contract liability                                                                                                         (91 344)                     -

8. Fair value information
   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 techniques.

   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 where available and rely as little as possible on company specific estimates.
   
   The group does not hold any financial instruments that are classified as Level 3. There were no transfers between Levels 1, 2 and 3 during the year.


9. Events after reporting period
   The directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

Disclaimer

This report, for the relevant period ended 28 February 2019 has been prepared in accordance with International Financial Reporting Standards (IFRS).
The financial information and financial statements included in this report are presented in Rands. Certain numerical figures included in this report have
been rounded. Therefore, discrepancies in tables between totals and the sums of the amounts listed and between figures in tables and their respective
analysis in the text of the report may occur due to such rounding. All changes in percentage and ratios were calculated using the underlying data in
ZAR thousands.

This report contains information, data and predictions about our markets and our competitive position. We have not verified the accuracy of such
information, data or predictions contained in this report that were taken or derived from industry publications, public documents of our competitors or
other external sources. We believe that the information, data and predictions presented in this report provide fair and adequate estimates of the size of
our markets and fairly reflect our competitive position within these markets. However, our internal estimates have not been verified by an external expert,
and we cannot guarantee that a third party using different methods to assemble, analyse or compute market information and data would obtain or
generate the same results. In addition, our competitors may define our and their markets differently than we do.

The report includes forward looking statements, which, although based on assumptions that we consider reasonable, are subject to risk and
uncertainties, which could cause actual results, events or conditions to differ materially from those expressed or implied herein. 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. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our
business or strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events. 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
Incorporated in the Republic of South Africa
Registration number 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
("Balwin" or "the Group")

Directors
H Saven (Chairperson)*#
SV Brookes (Chief Executive Officer)
J Weltman (Chief Financial Officer)
RN Gray (Managing Director)
A Shapiro*#
O Amosun*#
KW Mzondeki*#
T Mokgosi-Mwantembe*#
R Zekry#

* Independent
# Non-executive

Company secretary
JUBA Statutory Services Proprietary Limited

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

Sponsor
Investec Bank Limited

Transfer secretary
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)

www.balwin.co.za

14 May 2019



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