Balwin simplifies its apartment offering
The group says demand for lifestyle apartments remains strong but it will discontinue its elite developments amid depressed economic conditions
Balwin Properties, the country's largest sectional title developer, says it has simplified its offering to win over buyers whose affordability has weakened in a stagnant economy.
The group said 70% of its housing unit sales in the half year to August 2019 had been one- and two-bedroom apartments.
"We've had to adapt our operations in the past few months so that we could cater for a consumer under pressure. This doesn't mean we won't develop product to our highest specifications in the future, but for now there is a greater emphasis on a more affordable offering," financial director Jonathan Weltman said.
As many as 1,309 apartments were sold and handed over in the six months to August, compared with 1,058 apartments in the previous corresponding period.
There were strong sales at The Blyde in Tshwane East, Ballito Hills in Durban, and Kikuyu in Waterfall, Gauteng.
These included 1,213 build-to-sell apartments and 96 rental apartments sold to Balwin Rentals.
CEO Stephen Brookes said revenue increased 19% to R1.419bn and the company recorded a profit of R185m for the period. Earnings and headline earnings per share increased to 40c.
Operating costs rose by R27m as the company increased its headcount at middle and top management levels to deal with its expanding business. Higher marketing costs arising from focused campaigns further contributed to the increase.
Balwin's board was also strengthened with the appointment of Duncan Westcott and Julian Scher as independent non-executive directors from October 9.
Brookes said the group continued to evolve its corporate governance processes, especially around development opportunities.
The board surprised investors when it declared an interim gross dividend of 11.70c per ordinary share for the reporting period, having not paid a dividend for the interim period to August 2018.
Balwin aims to pay 30% of its earnings as dividends each year.
The group’s gross profit margin fell to 25% from 27% previously, with the company saying it had increased its marketing campaigns in response to a tepid domestic economy.
Balwin Properties CEO Steve Brookes spoke to Business Day TV about the company's interim financial performance.
Balwin has two elite model developments, The Polo Fields at Waterfall in Midrand and Paardevlei Lifestyle Estate in Somerset West. It has, however, opted to discontinue further elite developments given the weak economy.
“Our focus will remain on operational performance with continued emphasis on cash preservation, prudent capital allocation and cost containment,” said Brookes.
Balwin has a secured development pipeline to be rolled out over the next eight years and 28,127 apartments.
Anthony Clark, an independent analyst, said Balwin was trading at a bargain and that the company was primed to perform well when SA's economy gained momentum.
"These results were fair given the extremely challenging economic environment we face. Balwin has reverted to its core business, which is providing affordable well-priced quality units to the low to mid market as the elite offerings haven't sold as well," he said.
"Despite the environment, year-on-year and like-on-like, Balwin added R200m to its cash pile, which is commendable," he said.