JSE listed Balwin Properties, a developer that cares about environmentally responsible building practices and the delivery of high-quality apartments to its valued clients, has released its financial results for the year ended 28 February, 2025. Balwin Chief Executive, Steve Brookes sums it up.
WORDS & PHOTO: SUPPLIED
“The year under review was a tale of two halves, with a strong recovery in profitability in the second six months of the year, supported by three consecutive interest rate cuts of 25 basis points each since September 2024. This was supported by ongoing cost saving initiatives and a strong performance from the Balwin Annuity.”
Revenue for the period was 6% lower than the prior financial year at R2.2 billion on the back of 1 749 apartments handed over, compared to 1 892 apartments recognised in revenue in the 2024 financial year.
814 apartments were pre-sold for future financial periods, a significant increase on the 520 apartments pre-sold in the prior year, mostly as a result of strong buyers’ interest in the second six months following the reduction in interest rates.
Notwithstanding the contraction in number of apartments handed over, the group reported an 8% increase in profit for the year to R234.0 million, supported by cost reduction and solid contribution from the Annuity business.
Some revenue generation and cost engineering initiatives highlighted by the group include:
- Sale of land at Mooikloof Smart City for construction of a shopping centre for ~R46 million,
- This forms part of Balwin’s strategy to identify and dispose of smaller land parcels for complementary developments that will enhance the overall lifestyle and convenience factors for prospective homebuyers and investors,
- Reducing the rate of construction of apartments to match the rate of sales to preserve cash flows,
- Active management of the operating cost base in response to the subdued sales activity; and
- Managing construction costs prudently without compromising on quality standards.
Sales incentives
Brookes further intimates that sales incentives will be toned down in the current financial year, with demand for one- and two-bedroom apartments remaining strong, comprising 74% of total sales.
Balwin Annuity continued to perform strongly, increasing revenue by 33% to R178.0 million, whilst doubling net profit after tax to R43.2 million, up from R19.7 million in the prior year.
The Group’s Fibre and Connect business contributed R69.2 million to revenue and R10.5 million in net profit. Balwin’s Head Office generated net profit of R13.2 million, boosted by a positive revaluation gain, advertising revenue and leasing income.
Green Living, comprising the Group’s solar interests, posted R23.4 million in revenue and R4.4 million in net profit, reflecting growth in solar infrastructure gains, whilst Mortgages also delivered meaningful contributions.
Other Annuity businesses reported a standout performance with a combined revenue contribution of R30.1 million and R12.8 million in net profit respectively.
Western Cape demand strong
The group reported that demand in the Western Cape remains exceptionally strong, with land contracted for two new developments during the period as replacement projects for Fynbos (which was sold out) and De Aan-Zicht.
99% of apartments brought to market in the province were recognised in revenue, driving profitability. 801 apartments were handed over during the financial year, down from 947 on the back of developments selling out. The region’s revenue contribution however remained stable at 45%.
Top revenue contributor
Gauteng regained its position as the top contributor to revenue with 856 apartments recognised (2024: 732), boosting its share of total revenue to 47%, up from 37% in the prior financial year. These sales were supported by the resumption of construction at The Whisken in Kyalami, following town planning delays.
Developments under construction, which include the cost of land, infrastructure costs, development rights as well as construction costs increased by approximately R337 million to R6.7 billion at year end. This increase was driven predominantly by the investment in two developments in the period for new projects in the Western Cape, a region benefitting from sustained strong demand and healthy margins.
Operating costs for the year remained flat at R351 million, with a reduction at a company level offset by the increase in Balwin Annuity owing to their increased operational activity as evidenced by the 33% revenue growth recorded.
The gross profit margin showed improvement to 30%, up from 28% in the prior year to record a gross profit of R672 million, supported by the performance of the Balwin Annuity.
In line with its sustainability objectives, all new developments undertaken by Balwin Properties are aimed at achieving EDGE (Excellence in Design for Greater Efficiency) Advanced ratings. An initiative by the International Finance Corporation, the group has to date certified a total of 27 162 apartments with the IFC’s EDGE tool.
Notable milestones
Moreover, Balwin has achieved significant milestones with 19 722 apartments certified EDGE Advanced, demonstrating energy savings of 40% or more and water savings of 20% or more and reduction in embodied energy of 20% or more.
The company’s dedication to sustainable practices extends beyond individual apartments. 11 of Balwin’s lifestyle centres have achieved six-star Green Star ratings by the Green Building Council of South Africa, all of which have been accredited with Net Zero Carbon ratings, affirming their ability to generate and maintain a net zero carbon footprint. Balwin’s head office at 105 Corlett Drive has also received a 6-star Green Star rating, Net Zero Carbon and Net Zero waste rating, bringing the total Net-Zero certifications to 12.
In the pursuit of sustainable financing options for its clients, Balwin has secured 1 465 green bonds for home buyers during the period. These bonds not only provide financial benefits but also contribute to significant savings, amounting to a total of R98.8 million over 20 years.
The Group closed the year with a strong cash position of R254.8 million. Its loan-to-value remained consistent with the prior year at 40.4%.
Going forward, Brookes comments, “Despite the current protracted cycle of global and domestic economic uncertainty, I believe that our core business remains strong with sustained demand for residential apartments. We have a strong brand and never stop innovating, which allows us to also grow alternative, annuity-based income streams.
“Residential real estate development will always track interest rates – as evidenced by the increased demand following the 75 basis point reduction in lending rates. Further interest rate cuts should therefore drive a further recovery in demand, provided that the current macro environment does not deteriorate.
“We’re emerging leaner, and more focused from this cycle with significant strides made in optimising operational and development-related costs, which will over time reflect in increased gross and operating profit margins, which in turn will support a higher return on capital invested.
“The Group’s capital structure remains a key focus area, with the emphasis on appropriate cash management and the reduction in the quantum and cost of debt. To this end, we continue to make headway in engagements with local councils and governmental organisations for sustainable capital solutions on infrastructure rollouts, as well as the disposal of non-core land parcels with proceeds allocated to debt reduction.”
Top picture: Balwin’s Ballito Hills development.
