Balwin Properties' sales grow but red tape slows earnings

Balwin has managed to sell 15 to 30 units per development location. It had 14 developments under construction during the reporting period and built 1,033 apartments, in line with its sixmonth forecast at an average selling price of R995,911 per unit.

Despite this "solid performance in a constrained economic environment, the group's operating profit was negatively impacted by a delay in registration transfers", CEO Stephen Brookes said.

Currently, revenue is only accounted for on registration. As many as 1,033 apartments were handed over during the reporting period, of which only 756 were registered.

The subsequent effect was a 36% decline in headline earnings a share to 37c.

Operating profit dropped 26% to R235m and, had all the units been registered, profit after tax would have been R237m.

"Operationally our performance was in line with expectations, but the fact that we currently only account for revenue on transfer significantly impacted our results. Subsequently we obtained an expert opinion from our auditors and we are engaging our shareholders to change the estimate of timing to recognise revenue on the earlier registration in the deeds office and occupation. This will lead to greater predictability of our earnings," Brookes said.

The group's share price closed 4.01% higher at R7.01 on Tuesday, 15 November.

Balwin listed on October 15 2015. It develops and sells large-scale residential estates. These estates average in size between 500 and 1,000 units and are designed for young professionals and people seeking a "lock-up-and-go" lifestyle.

Balwin launched three new developments during the reporting period. Delays in transfer were experienced at Malakite on the East Rand, which affected 89 units. All these had been transferred by October. Delays at Amsterdam on the West Rand affected 69 units, and these units were in the process of being registered. There were also delays at Grove Lane in Pretoria, where 119 units were affected. All of these units too had been transferred by October.

During the review period, Balwin acquired the development rights of three land parcels in the Waterfall node.

This will see Balwin develop about 15,500 sectional title residential units in the node over an eight- to 10-year period.

Source: Business Day