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Balwin Properties trading resolutely through the tough property market

Balwin Properties CEO Steve Brookes. File

Balwin Properties CEO Steve Brookes. File

Published Oct 27, 2023


Balwin Properties, the JSE-listed developer of more than 70 large scale sectional title estates, passed its dividend for the six months to August 31 compared with the 9 cents payout at the same time a year ago because challenging conditions in the housing market caused its revenue to slide by 25%.

CEO Steve Brookes said in a telephone interview that during times of cyclical lows in the property market, he was glad of their brand, as it was respected, well loved and a good asset to have in the weak markets being experienced.

The group’s estates have a focus on high quality, environmentally efficient, affordable apartments with innovative lifestyle offerings.

Brookes said an indication of the quality of property development available in South Africa and the group could be gleaned from the fact that he had just returned from an international competition event in Dubai that had featured 102 judges, where the group had won 12 international awards for its property developments.

He said the market might improve marginally if interest rates started falling in the first quarter of next year, but he expected 2024 would, in general, be another difficult one for the group in terms of its trading environment.

Group revenue fell 25% to R1.2 billion from R1.6bn after consumer demand, loan affordability and investment in fixed property were negatively impacted by rising interest rates, inflationary increases and prolonged stages of load shedding.

Headline earnings a share increased 4% to 37.93 cents.

Balwin recognised 834 apartments in revenue for the period, a 39% reduction from the 1 360 apartments recognised for the prior comparative period.

Brookes said the business was being restructured to meet demand, with some people redeployed, a continuing focus on better efficiencies, lower construction activity, while at the same time, they were still looking for opportunities to grow.

He said that in line with a commitment made in the pre-listing statement, a development was being planned at Nelspruit, where there was a supportive land-owner, a helpful municipality, and it was in a busy trade corridor between South Africa and Mozambique.

He said their focus on improving gross margins over the past number of reporting periods was gaining traction. Balwin generated an interim gross profit margin of 33%, compared to 26% in the prior corresponding period and 29% for the 12 months ended February 28, 2023.

Gross profit margin on the sale of apartments increased due to cost containment measures, design efficiencies as well as price adjustments to cover increased costs where possible.

The annuity businesses, most of which was from fibre networks and other estate support services, mortgage origination and rental income, increased its contribution to 4.7% of group revenue from 2.5% at the same time a year before.

Brookes said they would continue to grow annuity income contributions and they planned to launch “a world first” this year.

The group closed the period with cash of R442.6m, a loan-to-value ratio of 42% and 3.3 times interest cover, exceeding the requirements of the bank covenants and thresholds as set by the board.