Balwin Properties, South Africa's largest sectional title developer, reported its financial results for the six months ended August 2024, noting a 28% decline in revenue due to a drop in apartment sales.
The group said that the residential property sector faced significant pressure during the interim period, primarily due to the prolonged high-interest rate environment.
Despite positive market sentiment following the announcement of the Government of National Unity (GNU) and improved macro-economic conditions, high borrowing costs continued to impact the residential property market.
It said that the recent 25 basis points reduction in the prime interest rate, announced on 19 September 2024, is seen as a positive step towards recovery in the residential property market. However, this reduction occurred post-reporting period and did not affect the current results.
Group revenue totalled R852.7 million, a 28% decline from the prior period’s R1.2 billion. This decrease was largely due to a drop in apartment sales, with 640 apartments recognized in revenue, down 23% from 834 apartments in the previous period.
Sales incentives were used to support demand, particularly in the Gauteng region.
Revenue: Decreased by 28% to R852.7 million
Profit for the Period: Decreased by 57% to R76.9 million
Earnings per Share: Decreased by 57% to 16.34 cents per share
Headline Earnings per Share: Decreased by 57% to 16.26 cents per share
Net Asset Value per Share: Increased by 3% to 875.05 cents per share
The annuity business portfolio showed robust growth, increasing its revenue by 17% to R65.8 million. Its contribution to total group revenue rose to 7.7%, up from 4.7% in the previous period.
The group’s gross profit margin remained consistent at 32%, compared to 33% in the prior period. This stability was supported by increased contributions from annuity businesses. However, the gross profit margin from apartment sales decreased to 23%, reflecting the challenging trading environment.
Consolidated operating expenditure was reduced by 7% to R155.1 million, as the group focused on cost optimization. The group recorded a profit after taxation of R76.9 million, a 57% decrease from the prior period.
The group closed the period with a cash balance of R242.8 million, exceeding the minimum funding covenants and thresholds set by the board. The loan-to-value ratio slightly reduced to 40.2% from 40.5% in February 2024.
The board has resolved not to declare a dividend for the period, prioritising debt reduction. The declaration of a dividend will be reconsidered when reviewing the results for the full financial year.
Balwin Properties said it continues to navigate challenging market conditions with a focus on cost optimisation and prudent capital allocation, aiming for a sustainable recovery in the residential property market.
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