Falling headline earnings weigh on Balwin shares

BALWIN Properties’ share price sagged 3.1 percent to R2.81 yesterday after it warned interim and headline earnings a share were expected to fall by 55 to 60 percent.

Earnings and headline earnings per share were expected to fall to 16 to 18 cents a share from last year’s 40c, due mainly to the approximate three-month halt in construction through the lockdown, according to a trading statement from the developer of apartment complexes.

Nevertheless, the Munyaka apartment development in Waterfall, Greencreek in Tshwane East, Greenbay in Gordon’s Bay and Izinga Eco Estate in Umhlanga were launched in the six months to August 31, with strong sales at all projects.

Baldwin said it sold 900 apartments, reported a R150 million increase in cash, with about R427m cash on hand at the end of the interim period.

However, because construction projects could not be completed due to the lockdown, revenue was expected to fall by 35 percent.

Demand for one- and two-bedroom apartments remained strong and comprised 74 percent (first half 2019: 71 percent) of apartments sold.

An online sales platform complemented existing sales processes, and 2 466 sales were recorded, with 350 concluded during the 9-week construction lockdown period.

Market conditions remained challenging and Balwin had continued its marketing campaigns to clients to help drive sales when necessary.

A reduction in gross margin in the interim period was mainly due to the increased marketing spend in the form of price support and cost incentives, which contributed to about a 5 percent reduction in the average selling price of apartments, compared to the prior period.

The reduced selling prices were absorbed by the healthy margins generated by the business, the group said in the trading statement.

The Greencreek, Tshwane East and Mooikloof Mega Residential City were gazetted, with Tshwane East designated as a Strategic Integrated Project (SIP) by the government, for the development of about 20 000 apartments.

About 1 667 apartments were presold beyond the reporting period and were not recorded in revenue in the interim period.

This represented an increase of 685 apartments forward-sold, when compared to the same reporting period in 2019, and indicated the sustained demand. During the interim period, Balwin had contracted land for an initial R94m at Mooikloof Eco Estate to expand in Tshwane. The rest of the purchase price would be paid out of profits from the apartments over 7 years.

“The board is optimistic about the opportunities presented through the recently gazetted SIPs,” the statement noted.

Balwin shares closed 4.14 percent lower at R2.78 on the JSE yesterday.