Balwin Properties said yesterday its consolidated earnings per share and headline earnings per share for the six months to August 31 were expected to fall between 54% and 59% over the prior corresponding period amid tough trading conditions in the residential property market.
This would translate into a decrease from the prior period’s 37.93 cents a share to between 15.55 and 17.45 cents per share. respectively, the developer of apartments said in a trading statement yesterday.
The results are expected to be released around October 28.
Investors appeared to view the results forecast positively, as the share price was up 2.37% to R2.18 yesterday afternoon on the JSE, at a time when the JSE All Share Index was up by only 0.62%.
The group’s directors said activity in the residential property sector was still under pressure due to high interest rates.
Improved sentiment after the Government of National Unity (GNU) was formed and better macro-economic conditions did not flow materially into the residential property market due to high borrowing costs.
Last month’s 25 basis point reduction in the prime interest rate was the first positive step for an anticipated recovery in the residential property market.
“The board is aligned with market consensus that the prime interest rate will continue to reduce gradually over the next few Monetary Policy Committee meetings, provided the macro-economic environment remains stable. These expected reductions are likely to materially improve demand in the residential housing market,” Balwin’s director said.
The group expected to recognise about 640 apartments in revenue for the six-month period. The annuity business portfolio increased its contribution to group revenue to about 8% from 4.7% during the same time last year.
The gross profit margin from the sale of apartments was expected to fall to 23% from 24%. The group gross profit margin, however, was expected to increase to about 32% from 28% at the end of February 2024, owing to the increased contributions from the annuity businesses.
Overhead costs were expected to decline. At a group level, overhead costs are expected to reduce by 5% from the prior interim period. The period closed with a healthy positive cash position.
The contribution of the annuity businesses to group operating profit was expected to increase to about 22%, well up from 9.3% at the end of August 2023, on the back of 15% anticipated operating profit growth within the annuity businesses.
Some 743 apartments were forward sold beyond the period end (February 2024: 529 apartments) and were not included in the results.
These improved forward sales would provide a solid base for the remainder of the financial year, where construction activity was expected to significantly increase due to the healthy forward sales, together with the forecast improved trading conditions.
BUSINESS REPORT