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Voluntary business and trading statement for the year ended 29 February 2020
Balwin Properties Limited
(Incorporated in the Republic of South Africa)
Registration number 2003/028851/06
Share code: BWN
ISIN: ZAE000209532
(“Balwin” or “the company” or “the group”)
VOLUNTARY BUSINESS AND TRADING STATEMENT FOR THE YEAR ENDED 29 FEBRUARY 2020
HIGHLIGHTS
• Approximately 2 700 apartments sold and recognised in revenue in the current period
(2019: 2 437 apartments)
• R150 million increase in cash and cash equivalents with approximately R475 million cash
on hand at year end
• Successful modification of the Green product model sales strategy to improve returns to
shareholders
• Registration of over 16 000 apartments as Excellence in Design for Greater Efficiency
(EDGE) certified with the Green Building Council South Africa
BUSINESS UPDATE
Balwin continued to experience strong demand for its lifestyle apartments for the year ended
29 February 2020, despite continued economic headwinds and increasing consumer pressure.
The sustained demand is reflected in an approximate 11% increase in the number of
apartments recognised in revenue during the financial year, when compared to the prior year.
This increase in the demand for apartments underpinned an expected 11% growth in revenue
when compared to the prior year, with approximately 2 700 apartments handed over in the
current financial year. Demand for one- and two-bedroom apartments remained strong and
comprised approximately 74% of the total apartments sold.
Balwin followed the trend of the interim results by responding to the ongoing depressed
economic conditions by increasing its marketing campaigns to clients. Whilst proving highly
successful in driving sales, these campaigns have contributed to an approximate 5% reduction
in the average selling price of apartments which was absorbed by the healthy margins
generated by the business. Balwin will look to limit the campaigns offered to clients in the
upcoming financial year, however, being cognisant of the prevailing economic environment
affecting customers, specific marketing campaigns will remain a key component of the
business and will be employed to drive sales where necessary.
Balwin’s gross margin is expected to show a slight increase from the interim results, but will
reduce when compared to the prior financial year. This reduction is due to the inclusion of the
elite model and Green product developments. Excluding these developments, the margin of
the core business model remained consistent at approximately 32% for the year.
Approximately 570 apartments have been pre-sold and have not been recorded in revenue
during the current financial period. The sales in the early part of March 2020 have been
exceptional. This is primarily due to the launch of Munyaka, the new flagship development in
Waterfall featuring the second Crystal Lagoon introduced by Balwin and the first of its kind in
Johannesburg. Sales in excess of 550 apartments have been achieved in the month to date,
totalling R850 million.
Cost management remains a priority area, with overhead costs being carefully monitored. As
communicated in the interim results, overhead costs are nonetheless expected to substantially
increase in the current financial year, mainly due to an increase in head count and salary
related costs as the company continues to grow its middle-to-top management team as well
as the focussed marketing related costs. The increase in the operating costs is expected to be
consistent with the increase reported in the interim results.
The company continued its focus on cash management and capital allocation as top priorities
for the year and is pleased to report that cash on hand for the group is expected to improve
to R475 million at year end, an increase of approximately R150 million from the prior year. Cash
management and cash utilisation will remain a focus areas for the group.
Balwin will continue to review its development pipeline to ensure that it is complementary to
its core business model. The company’s immediate focus remains on the execution of its
existing pipeline. It does, however, remain alert to strategic opportunities in identified nodes
and any such opportunities will be contracted in a manner that is not onerous on the cash
resources of the company.
SALES TO BALWIN RENTALS PTY LIMITED AND MODIFICATION IN SALES STRATEGY FOR THE “GREEN”
PROJECT MODEL
During the financial year, Balwin handed over an additional 96 apartments at Green Park,
Boksburg (Johannesburg) to Balwin Rentals Pty Limited. In total, 240 apartments have been
sold and transferred to Balwin Rentals. Based on strong demand from investors and
homebuyers, the company modified the sales strategy for the Green Park development during
the year by converting the remainder of the development to a build-for-sale product which
was launched to the market in August 2019.
Following the positive demand experienced at Green Park this modified approach was
employed at Green Lee, Linbro Park (Johannesburg) where the build-for sale model was
successfully sold to the market with the first three phases being sold out and handed over at
year end.
ANNUITY INCOME
The group remains committed to delivering annuity income through relationships that
enhance the lifestyle offering to Balwin’s customers. Contributions from annuity income
initiatives currently constitute a negligible portion of the total profits of the group, with the most
significant contributor being Balwin Fibre Pty Limited.
OUTLOOK
The Board remains apprehensive about the prevailing macro-economic climate and policy
uncertainty. In this context, and as advised at the interim results, the Board continues to place
an emphasis on appropriate cash management and cost containment. The Board is also
concerned about the possible implications of the coronavirus Covid-19 on our people, our
communities, our operations and the financial implications to the business. The Board is taking
pro-active steps to appropriately understand and manage the risks associated with the virus.
Notwithstanding these concerns, the Board is optimistic in the resilience of the Balwin product
as demonstrated by the history of sustained demand by its customers and remains alert for
opportunities to enhance its development pipeline in strategic nodes.
VOLUNTARY TRADING STATEMENT
The following disclosure is made in accordance with Section 3.4(b) of the JSE Limited’s Listings
Requirements:
- Consolidated earnings per share and headline earnings per share for the year ended
29 February 2020 are expected to decrease by between 6% and 11% over the prior
year, translating into a decrease from the prior financial year’s 95.82 cents (HEPS: 95.84)
to a range of between 85.3 and 90.5 cents per share.
The financial information which this voluntary trading statement is based on has not been
reviewed and reported on by the company’s external auditors.
It is expected that Balwin will release its results for the year ended 29 February 2020 on or about
15 May 2020.
Bedfordview
18 March 2020
Sponsor: Investec Bank Limited
Date: 18-03-2020 07:05:00
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