JSE-listed property developer Balwin Properties, for the financial year ended February 28, 2025, reported revenue of R2.2-billion, 6% lower than the prior financial year, on the back of 1 749 apartments handed over compared with 1 892 apartments recognised in revenue in the 2024 financial year.

Despite the contraction in the number of apartments handed over, the group reported an 8% increase in profit for the year to R234-million, supported by cost reduction and a solid contribution from its annuity business.

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.

“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,” said Balwin CE Steve Brookes.

Balwin annuity continued to perform strongly, increasing revenue by 33% to R178-million, and doubling net profit after tax to R43.2-million, up from R19.7-million in the prior financial year.

Additionally, 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, he said.

The group's Green Living solar interests business posted R23.4-million in revenue and R4.4-million in net profit, which reflects growth in solar infrastructure gains, while its Mortgages business 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.

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 its increased operational activity as evidenced by the 33% revenue growth recorded.

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%.

Developments under construction, which include the cost of land, infrastructure costs, development rights, as well as construction costs increased by about 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, with the region benefitting from sustained strong demand and healthy margins.

Meanwhile, sales incentives will be toned down in the current financial year, with demand for one- and two-bedroom apartments remaining strong, and comprising 74% of total sales.

Further, 814 apartments were pre-sold for future financial periods, which is 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.

In line with its sustainability objectives, all new developments undertaken by Balwin Properties are aimed at achieving Excellence in Design for Greater Efficiency (EDGE) Advanced ratings.

An initiative by development finance institution the International Finance Corporation (IFC), the group has to date certified a total of 27 162 apartments with the IFC’s EDGE tool.

Additionally, 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 said.

Balwin has also secured 1 465 green bonds for home buyers during the period, which provide financial benefits for home buyers and also contribute to significant savings, amounting to a total of R98.8-million over 20 years.

Further, 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.

The Western Cape region’s revenue contribution remained stable at 45%.

Gauteng regained its position as the top contributor to revenue with 856 apartments recognised, up from 732 in the 2024 financial year, 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, Gauteng, following town planning delays, Balwin reported.

OUTLOOK
“Despite the current protracted cycle of global and domestic economic uncertainty, our core business remains strong with sustained demand for residential apartments.

“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,” said Brookes.

“We have made significant strides 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.”

Further, 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.”