Strong demand bolsters Balwin's revenue despite economic headwinds (results for the year ended 29 Feb 2020)

Posted On Monday, 18 May 2020 16:19 Published by
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JSE listed Balwin Properties, a developer that cares about environmentally responsible building practices and the delivery of high-quality apartments to its valued clients, reported continued strong demand for its unique lifestyle apartments despite increased economic headwinds.

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A total of 2 715 apartments were recognised in revenue for the year ended 29 February, 278 more than the prior financial year. Sales were bolstered by especially one- and two-bedroom apartments in Balwin’s core model, and strong demand for its lower-specification Green developments, where demand outstripped the average rate of construction of 20 units per month.

Balwin Chief Executive, Steve Brookes commented:

“Our continued focus on operational performance, cash preservation and executing on our existing development pipeline during the year paid off with pleasing results. In response to the weak economy and consumer pressure, we’ve adapted our sales offering to include more one- and two-bedroom apartments and the demand for our Green developments exceeded our expectations by far.

“There has never been a better time to buy a property than now, with two interest rate cuts making owning a home much more affordable. In addition, we negotiated preferential interest rate for qualifying buyers on our EDGE certified Green developments through Absa’s Eco Home Loan, further giving back to our customers.”

Revenue increased by 11% to R2.9 billion from R2.6 billion in the prior year and cash on hand improved by R147.2 million to a healthy R476.5 million.

Operating expenses increased in line with market guidance to R235.6 million, largely as a result of the bolstering of staff at mid- and top management level, as well as strategic marketing related costs. Operating profit for the year subsequently reduced by 9% from R630.1 million to R574.0 million.

Despite strong sales, the Group’s profit margin of 27.1% (down from 30.1% in the prior financial year) was impacted by the inclusion of its two elite model developments. Excluding these developments, the Group returned a 31.2% gross margin, in line with management expectations.

The Company indicated that considering current market conditions, it will discontinue its higher specification elite model apartments once the existing two developments have been completed.

Selling prices remained flat on average at R1 063 667 per apartment (FY19: R1 066 452) mainly due to price increases in the core model being offset by higher sales of the Green developments at relatively lower selling prices.

The core developments continue to provide the majority of the Group’s revenue at 79% (FY19: 78%) with the Green developments contributing 6% (FY19: 3%) to total revenue. It is expected that the Green developments will increasingly contribute to revenue.

Balwin’s uncompromising approach to quality and continuous innovation was recognised at the Africa and Arabia Property Awards, where the Group received four awards. This brings to 16 the number of international awards recognising the innovation and excellence of the business.

“The launch of Munyaka, our flagship development in Waterfall and home to the largest lagoon in the Southern Hemisphere with Crystal Lagoons® technology resulted in Balwin breaking all sales records in March this year, with over 807 sales achieved for the month” commented Brookes.

“These sales were further supported by the launch of our much anticipated Izinga Eco Estate offering eco-friendly, luxury living in Umhlanga, KwaZulu-Natal.”

The strength and resilience of Balwin’s brand continued to be evident post the lockdown period, with more than 200 sales achieved through its online platforms and 250 apartments being financially secured through the Group’s bond origination departments.

Commenting on the impact of COVID-19, Brookes said:

“Although COVID-19 will no doubt have an impact on the Group, our cash position remains strong with R476.5 million cash on hand and low gearing of 27%.

“We are well positioned to negotiate through this uncertain times and have implemented several contingencies in partnership with our key suppliers and contractors to deal with any potential eventualities and ensure that any potential disruption to our supply chain is minimized.

Last modified on Monday, 18 May 2020 16:28

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