The Western Cape has overtaken Gauteng as Balwin Properties' main revenue contributor as income from the inland province plunged nearly 50% in the year ended February.
In its annual report released alongside it annual results on Monday, the company said the business was highly interest rate sensitive and there had been no respite in borrowing costs, which were expected to start declining from the first half of 2024.
“The pressure on consumer spending from sustained high interest rates and above-inflationary living cost increases has translated into reduced demand for apartments, owing to the lack of affordability of loans. Consequently, the number of apartments recognised in revenue declined 32% over last year, to 1,892 apartments,” CEO Steve Brookes in a note to shareholders.
“The largest sales decline was experienced in Gauteng, where revenue declined by 47%. Gauteng has traditionally been our flagship region, while this year the contribution reduced from 48% to 39% of total apartments handed over. However, we are optimistic on the longterm sustained demand within Gauteng, which is expected to gradually improve as the market recovers.”
The plunge in Gauteng sales saw the Western Cape — for the first time in the company’s history — become the group’s largest revenue contributor, accounting for 46% of revenue in the year under review, up from 35% in the prior year.
The Western Cape has also been a beneficiary of the semigration wave, which has seen people leave the inland provinces for the Cape.
The group’s KwaZulu-Natal operations recorded a 34% decrease in revenue owing to delays in town planning approval at Izinga Eco-Estate, which “significantly restricted the delivery of apartments”.
Balwin’s full-year profit halved as high interest rates, inflationary increases and prolonged stages of load-shedding affected consumer demand, loan affordability and investment in fixed property.
The specialist residential property developer's profit for the year declined 50% to R217.4m, while headline earnings share fell 48% to 47.94c, it said in a statement on Monday.
Revenue was down 29% to R2.4bn with 1,892 apartments recognised in revenue, a 32% reduction from the prior year reflecting the challenging conditions in the residential housing market, the company said.
The annuity business portfolio experienced strong growth off a low base and increased its revenue to R132.5m, contributing 5.6% to the total group revenue.
“The performance of the annuity businesses is pleasing and though still not material to the group, has provided profit margin support in the challenging trading conditions,” it said.
After considering current and expected trading conditions and market uncertainty, the board resolved not to declare a dividend for the 2024 financial year. It declared a dividend of 24c in 2023.
“The board’s primary focus in this environment is to apply capital to reduce the group’s debt exposure. The board will reconsider the declaration of a dividend for the 2025 financial year,” it said.
Cash management and utilisation would remain a priority and management continued to engage with funding partners to ensure that appropriate facilities and financial support remained in place, Balwin said.
It closed the period with a cash balance of R289.6m, and cash and cash equivalents on hand exceed funding covenants and thresholds set by the board.
The loan-to-value ratio reduced marginally to 40.5% from 40.7% in 2023.
JSE-listed Balwin has a secondary listing on the A2X stock exchange. The company has developed more than 100,000 apartments in high-growth, key metropolitan areas in Gauteng including Johannesburg and Tshwane, as well as the Western Cape and KwaZulu-Natal.
It has an 18-year development pipeline of more than 43,000 apartments across 26 developments in key areas.
The company said it had a healthy pipeline and was well positioned to execute its commitments.
“Balwin remains well positioned to address the undersupply of housing in SA through its pipeline of over 41,000 apartments, backed by the proven business model applied in approximately 100 large-scale developments down the years,” the company said.
“Brookes has led the business for over 25 years and together with his team has encountered and overcome several economic downturns.”
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