BALWIN PROPERTIES LIMITED — Annual Report 2021

Jul 21, 2021

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AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 2021

General Information

Country of incorporation and domicile Nature of business and principal activities

Directors

Prescribed officers

Business and registered office address

Auditor

Company secretary

Preparer

Date of approval of Annual Financial Statements

South Africa

Residential property development of sectional title estates and related activities

SV Brookes J Weltman H Saven KW Mzondeki R Zekry A Shapiro T Mokgosi-Mwantembe O Amosun D Westcott J Scher

U Gschnaidtner RN Gray

Block 1, Townsend Office Park 1 Townsend Avenue, Bedfordview 2007

BDO South Africa Registered Auditor

FluidRock Co Sec Proprietary Limited

The Consolidated and Separate Annual Financial Statements have been compiled under the supervision of: J Weltman (Chief Financial Officer) CA (SA)

17 May 2021

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 B

ANNUAL FINANCIAL STATEMENTS

Index

The reports and statements set out below comprise the Consolidated and Separate Annual Financial Statements presented to the shareholders:

to the shareholders:
	Page
Directors’ responsibility statement and approval of Consolidated and Separate Annual Financial
Statements	2
Company Secretary’s certification	3
Audit and Risk Committee report	4 – 8
Directors’ report	9 – 10
Independent auditor’s report	11 – 13
Statements of financial position	14
Statements of profit or loss and other comprehensive income	15
Statements of changes in equity	16
Statements of cash flows	17
Accounting policies	18 – 28
Notes to the Annual Financial Statements	29 – 59

LEVEL OF ASSURANCE

These Consolidated and Separate Annual Financial Statements have been audited in compliance with the applicable requirements of the Companies Act of South Africa, 2008 (“the Companies Act”).

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Directors’ Responsibility Statement and Approval of Consolidated and Separate Annual Financial Statements

The Directors are required in terms of the Companies Act to maintain adequate accounting records and are responsible for the content and integrity of the Consolidated and Separate Annual Financial Statements and related financial information included in this report. It is their responsibility to ensure that the Consolidated and Separate Annual Financial Statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditor is engaged to express an independent opinion on the consolidated and separate financial statements.

The Consolidated and Separate Annual Financial Statements have been consistently prepared in accordance with International Financial Reporting Standards (“IFRS”) and its interpretations adopted by the Independent Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act No 71 of 2008, as amended, of South Africa (“Companies Act”) and the JSE Listing Requirements (“JSE”).

The Directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the Directors to meet these responsibilities, the Board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach.

The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The Directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Consolidated and Separate Annual Financial Statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The Directors have reviewed the Group’s cash flow forecast for the 12 months to May 2022 and, in light of this review and the current financial position, they are satisfied that the Group has or had access to adequate resources to continue in operational existence for the foreseeable future.

The external auditors are responsible for independently auditing and reporting on the Group’s consolidated and separate financial statements. The consolidated and separate financial statements have been examined by the Group’s external auditors and their report is presented on pages 11 to 13.

The Consolidated and Separate Annual Financial Statements set out on pages 3 to 59, which have been prepared on the going concern basis, were approved by the Board on 17 May 2021 and were signed on their behalf by:

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Director

Director

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

CEO and CFO Responsibility Statement

The Directors, whose names are stated below, hereby confirm that:

• (a) the Annual Financial Statements set out on pages 3 to 59, fairly present in all material respects the financial position, financial performance and cash flows of the issuer in terms of IFRS;

• (b) no facts have been omitted or untrue statements made that would make the Annual Financial Statements false or misleading;

• (c) internal financial controls have been put in place to ensure that material information relating to the issuer and its consolidated subsidiaries have been provided to effectively prepare the financial statements of the issuer; and

• (d) the internal financial controls are adequate and effective and can be relied upon in compiling the Annual Financial Statements, having fulfilled our role and function within the combined assurance model pursuant to principle 15 of the King Code. Where we are not satisfied, we have disclosed to the Audit Committee and the auditors the deficiencies in design and operational effectiveness of the internal financial controls and any fraud that involves Directors, and have taken the necessary remedial action.

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SV Brookes Chief Executive Officer

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J Weltman Chief Financial Officer

Company Secretary’s Certification

In terms of section 88(2)(e) of the Companies Act 71 of 2008 as amended, we certify that to the best of our knowledge and belief, the Balwin Group has in respect of the financial year reported upon, lodged with the Companies and Intellectual Property Commission all returns required of a public Group in terms of the Companies Act 71 of 2008 and that all such returns are true, correct and up to date.

Ronelle Kleyn

On behalf of: FluidRock Co Sec Proprietary Limited

17 May 2021

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Audit and Risk Committee Report

The Audit and Risk Committee (“the Committee”) has pleasure in submitting this report, which has been approved by the Board and has been prepared in accordance with section 94(7)(f) of the Companies Act No 71 of 2008 of South Africa (“the Act”) and incorporating the recommendations of the Report on Corporate Governance for South Africa, 2016 (“King IV”).

The Committee assists the Board in its responsibilities covering the:

• internal and external audit process for the Group taking into account the significant risks;

• adequacy and functioning of the Group’s internal controls;

• integrity of financial reporting; and

• risk management and information technology.

The members confirm that the Committee has performed all the duties required in terms of section 94(7)(f) of the Act.

Owing to the size of the Company, the functions of an Audit Committee and Risk Committee have been combined to be directed by a single Audit and Risk Committee and the internal audit function is outsourced to KPMG.

COMMITTEE COMPOSITION

The Committee comprises four Non-Executive Directors and all members act independently as described in the Act.

The Chief Executive Officer, Chief Financial Officer, key finance management, the external auditor and the internal auditor attend meetings by invitation. The Board is satisfied that the independence, experience and qualifications of each member enables them to fulfil the Committee’s mandate. In addition to the quarterly meetings, the Committee meets at least once a year with the Company’s internal and external auditors, without management being present.

The Committee comprised the following members:

Director	Appointed	Experience	Meeting attendance
Tomi Amosun CA(SA)	May 2017	Over 15 years of real estate, listed equity and	7/7 meetings
		private equity experience
Kholeka Mzondeki BCom, FCCA (UK),	September 2015	Over 20 years experience in governance and	7/7 meetings
Diploma Investment Management		financial management
Arnold Shapiro	October 2016	Over 30 years of asset management,	7/7 meetings
BBus Sci (Finance Hons)		portfolio management and general
		management experience
Duncan Westcott CA(SA)	October 2019	30 years as an accountant and auditor, followed	7/7 meetings
		by 10 years outside the profession working in
		industry and commerce on various financial and
		related Non-Executive tasks

The Committee collectively has the necessary financial knowledge, skills and experience to execute their duties effectively. The Committee is pleased to report to shareholders on the progress against its key focus areas for the 2021 financial year.

FOCUS AREAS OF THE COMMITTEE

The key areas of focus in the year under review were as follows:

Focus area	Progress
Appointment of an independent	Following a successful Request for Proposal process, the Committee appointed BDO
external auditor	South Africa Inc. as the independent external auditor for the Group.
Overview of the financial implications	The Committee played an active role in engaging with management and is satisfied with the
that arise from the Covid-19 pandemic	processes implemented to best mitigate the impact during the pandemic on the financial
	performance of the Group. This included oversight of the solvency and liquidity of the Group
	including detailed cash flow reviews.
Oversight of management’s response	The Committee performed an oversight function with respect to management’s responsibility to
to the amendment to the JSE Listings requirements in relation to the establishment and maintenance of	ensure appropriate internal financial control measures are in place, culminating in the statement by the Chief Executive Officer and Chief Financial Officer with respect to an effective control
internal controls	function.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Audit and Risk Committee Report

Focus area	Progress
Overview on IT systems and control	The Committee oversees the implementation of IT governance mechanisms and standards to
	ensure the effectiveness and efficiency of the Group’s information systems. The Committee
	reviewed the existing IT management procedures during the year and revised the work plan
	of the Committee to enhance the level of reporting on this matter. The Committee approved
	an updated IT governance framework in the current year and is in the process of updating its
	IT policies.
Overview of capital allocation and cash	The Committee performed multiple reviews of management’s cash forecasting during the year
utilisation	and is satisfied with the liquidity position of the Group together with its planning with respect
	to the cash management of the Group.
	The Committee continued its overview of the capital allocation and cash utilisation of the Group,
	including the review of the minimum cash resources of the Group and oversight of the cash flow
	reporting and management of the Group.
JSE Proactive monitoring	The Committee reviewed the JSE proactive monitoring reports and ensured that management
	appropriately responded to the matters noted.

Planned areas of focus for the 2022 financial year are as follows:

• Monitoring and management of financial reporting and governance;

• Balance sheet management and financial sustainability in a continued uncertain trading environment;

• Embedment of the combined assurance and continued proactive engagement with the internal and external audit functions; and

• Continued overview on IT systems and control.

ROLES OF THE AUDIT COMMITTEE

The terms of reference of the Committee have been updated and approved by the Board, setting out its duties and responsibilities as prescribed in the Act and King IV and incorporating additional duties delegated by the Board.

The Committee:

• fulfils the duties that are assigned to it by the Act and other legislation, including the statutory Audit Committee functions required for subsidiary companies;

• assists the Board in overseeing the quality and integrity of the Group’s integrated reporting process, including the financial statements and announcements in respect of the financial results;

• ensures that an effective control environment is maintained in the Group;

• reviewed and adopted a combined assurance model;

• provides the Chief Financial Officer, external auditor and the internal auditor with unrestricted access to the Committee and its chairman as is required in relation to any matter falling within the ambit of the Committee;

• meets with the external auditor, senior management and Executive Directors as the Committee may elect;

• meets separately with the internal and external auditors without other executive Board members and the Company’s Chief Financial Officer being present;

• reviews and recommends to the Board the interim financial results and annual financial statements;

• oversees the activities of, and ensures coordination between, the activities of the internal and external auditors;

• receives and deals with any complaints concerning accounting practices, internal audit or the content and audit of its financial statements or related matters;

• oversees and ensures the appropriateness of the delegation of authority of the business;

• conducts annual reviews of the Audit and Risk Committee’s work plan and terms of reference;

• assesses the performance and effectiveness of the Audit and Risk Committee and its members on a regular basis; and

• assesses the effectiveness of the finance department and skills and experience of the chief financial officer.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Audit and Risk Committee Report

EXECUTION OF FUNCTIONS DURING THE YEAR

The Committee is satisfied that, for the 2021 financial year, it has performed all the functions required to be performed by an Audit and Risk Committee as set out in the Act and the Committee’s terms of reference.

EXTERNAL AUDIT

The Committee, among other matters:

• following a formal request for proposal process, nominated BDO South Africa Inc. (“BDO”) and Paul Badrick as the external auditor and designated auditor respectively to shareholders for appointment as auditor for the financial year ended 28 February 2021, and ensured that the appointment complied with all applicable legal and regulatory requirements for the appointment of an auditor;

• nominated the external auditor and the independent auditor of each material subsidiary Company for re-appointment;

• reviewed the audit effectiveness and evaluated the external auditor’s internal quality control procedures;

• obtained an annual confirmation from the auditor that their independence was not impaired;

• requested from BDO the information detailed in paragraph 22.15(h) in their assessment of the suitability for appointment of BDO and Paul Badrick prior to their reappointment, which was presented on 21 May 2020;

• satisfied themselves with the quality of the external auditor;

• maintained a policy setting out the categories of non-audit services that the external auditor may and may not provide;

• approved the non-audit services performed by BDO in the current year;

• approved the external audit engagement letter, the plan and the budgeted audit fees payable to the external auditor;

• considered whether any reportable irregularities were identified and reported by the external auditor in terms of the Auditing Profession Act, No. 26 of 2005; and

• considered any reported control weaknesses, management’s response for their improvement and assessed their impact on the general control environment.

This is the first year in which BDO has performed the external audit function. The Committee is satisfied that BDO is independent of the Group after taking the following factors into account:

• representations made by BDO to the Committee;

• the auditor does not, except as external auditor or in rendering permitted non-audit services, receive any remuneration or other benefit from the Company;

• the auditors’ independence was not impaired by any consultancy, advisory or other work undertaken by the auditor; and

• the criteria specified for independence by the Independent Regulatory Board for auditors and international regulatory bodies.

INTERNAL AUDIT

The Committee:

• reviewed and approved the internal audit charter and annual audit plan and evaluated the independence, effectiveness and performance of the internal audit department and compliance with its charter;

• satisfied themselves that the quality, experience and expertise of the internal audit function and the chief audit executive is appropriate;

• considered the reports of the internal auditor on the Group’s system of internal control including financial controls, business risk management and maintenance of effective internal control systems; and

• reviewed significant issues raised by the internal audit processes and the adequacy of corrective action in response to significant internal audit findings.

ADEQUACY AND FUNCTIONING OF THE GROUP’S INTERNAL CONTROLS

The Committee reviewed the effectiveness of the design and implementation of controls with respect to the plans and work outputs of the external and internal auditors and concluded that these were adequate to address all significant financial risks facing the business.

As noted above, it also reviewed the reporting around the adequacy of the internal controls together with the effectiveness of the combined assurance provided and based on this concluded that there had been no material breakdowns in internal control, including financial controls, business risk management and the maintenance of effective material control systems.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Audit and Risk Committee Report

EXECUTION OF FUNCTIONS DURING THE YEAR

FINANCIAL REPORTING

The Committee ensures that the financial reporting to stakeholders fairly presents the state of affairs of the Group. This covers the Consolidated and Separate Annual Financial Statements, integrated report, interim and preliminary reporting.

The Committee among other matters:

• confirmed the going concern as the basis of preparation of the interim and Consolidated and Separate Annual Financial Statements;

• reviewed compliance with the financial conditions of loan covenants and determined that the capital of the Company was adequate;

• examined and reviewed the interim and Consolidated and Separate Annual Financial Statements, as well as all financial information disclosed prior to the submission to the Board for their approval and then for disclosure to stakeholders;

• ensured that the Consolidated and Separate Annual Financial Statements fairly present the financial position of the Group and of the Company as at the end of the financial year and the results of operations and cash flows for the financial year and considered the basis on which the Company and the Group was determined to be a going concern;

• reviewed the cash flow forecasting performed to stress test the cash flows of the Group with respect to the assumptions and implications surrounding Covid-19;

• considered the appropriateness of the disclosure surrounding the Covid-19 pandemic in the Consolidated and Separate Annual Financial Statements;

• considered the appropriateness of the accounting policies adopted and changes thereto;

• reviewed the external auditor’s audit report and key audit matters included;

• reviewed the representation letter relating to the Consolidated and Separate Annual Financial Statements which was signed by management;

• considered any problems identified and reviewed any significant legal and tax matters that could have a material impact on the financial statements; and

• considered accounting treatments, significant unusual transactions and accounting judgments.

SIGNIFICANT AREAS OF JUDGEMENT

In arriving at the figures disclosed in the Consolidated and Separate Annual Financial Statements there are many areas where judgement is needed. These are outlined in note 1.2 to the Consolidated and Separate Annual Financial Statements. The Committee has looked at the quantum of the assets and liabilities on the statements of financial position and other items that require significant judgement and decided to note the following:

• Recognition of cost of constructed residential apartments sold;

• Net realisable value of developments under construction; and

• Preparation of cash flow forecasts.

RISK MANAGEMENT AND INFORMATION TECHNOLOGY (IT) GOVERNANCE

The Committee:

• ensured that intellectual property contained in information systems are protected;

• ensured that adequate business arrangements are in place for disaster recovery;

• ensured that all personal information is treated by the Company as an important business asset and is safeguarded as per POPI Act;

• approved the IT governance framework; and

• reviewed the Group’s policies on risk assessment and risk management, including fraud risks and IT risks pertaining to financial reporting and the going concern assessment, and found them to be sound.

LEGAL AND REGULATORY REQUIREMENTS

To the extent that these may have an impact on the Consolidated and Separate Annual Financial Statements, the Committee:

• reviewed legal matters that could have a material impact on the Group;

• reviewed the adequacy and effectiveness of the Group’s procedures, including its risk management framework, to ensure compliance with legal and regulatory responsibilities;

• monitored complaints received via the Group’s whistleblowing service. No complaints were reported; and

• considered reports provided by management, internal audit and the external auditor regarding compliance with legal and regulatory requirements.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Audit and Risk Committee Report

EXPERTISE AND EXPERIENCE OF CHIEF FINANCIAL OFFICER AND THE FINANCIAL FUNCTION

As required by 3.84(g) of the JSE Limited Listings Requirements, the Committee has satisfied itself that the Chief Financial Officer, Jonathan Weltman, has the appropriate expertise and experience. In addition, the Committee satisfied itself that the composition, experience and skills set of the finance function met the Group’s requirements.

ELECTION OF COMMITTEE MEMBERS

Pursuant to the provisions of section 94(2) of the Companies Act, which requires a public Company to elect an Audit Committee at each annual general meeting, it is proposed in the notice of annual general meeting that the Committee members are available for re-appointment until the next annual general meeting in 2021.

EVALUATION OF THE COMMITTEE

In line with King IV and the Board charter, the Committee conducted a self-evaluation of its functions. The review concluded that the Committee operated effectively and had successfully discharged its duties and responsibilities.

CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS

Following the review by the Committee of the Consolidated and Separate Annual Financial Statements of Balwin Properties Limited for the year ended 28 February 2021, the Committee is of the view that in all material aspects they comply with the relevant provisions of the Act and International Financial Reporting Standards and fairly present the consolidated and separate financial positions at that date and the results of operations and cash flows for the year then ended.

Kholeka Mzondeki

Chairperson Audit and Risk Committee

17 May 2021

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Directors’ Report

The Directors have pleasure in submitting their report on the activities of Balwin Properties Limited (referred to as “the Company”) and its subsidiaries (altogether referred to as “the Group”or “consolidated”) for the year ended 28 February 2021.

1. REVIEW OF FINANCIAL RESULTS AND ACTIVITIES

Balwin is a specialist, national large-scale residential property developer focused on turnkey development and sale of sectional title apartments in the low-to-middle market segments.

The Group recorded total comprehensive income for the year ended 28 February 2021 of R336.4 million (2020: R411.4 million). Further details of the Group’s and Company’s results and activities are commented on in detail in the accompanying financial statements.

2. STATE OF AFFAIRS

All matters material to the appreciation of the Group’s and Company’s affairs and the results are disclosed in the accompanying financial statements and do not require further comment or explanation.

All profits and losses are attributable to the main activities of the Group.

3. SHARE CAPITAL

SHARE CAPITAL
			2021	2020
Authorised			Number of shares
Ordinary shares			1 000 000 000	1 000 000 000
	2021	2020	2021	2020
Issued	R‘000	R‘000	Number of shares
Ordinary shares	663 079	652 978	469 254 734	467 632 380

There have been no changes to the authorised share capital during the year under review. Treasury shares were issued in the current year in terms of the existing long-term incentive scheme. Refer to note 21 for details.

4. DIVIDENDS

A dividend of R92 549 748 was declared and paid during the 2021 financial year (2020: R123 761 678).

5. DIRECTORATE

The Directors in office at the date of this report are as follows:

Directors	Designation
SV Brookes	Chief executive officer
J Weltman	Chief financial officer
H Saven	Independent Non-Executive Director
KW Mzondeki	Independent Non-Executive Director
R Zekry	Non-Executive Director
A Shapiro	Independent Non-Executive Director
T Mokgosi-Mwantembe	Independent Non-Executive Director
O Amosun	Independent Non-Executive Director
D Westcott	Independent Non-Executive Director
J Scher	Independent Non-Executive Director
Prescribed officers
RN Gray	Managing Director
U Gschnaidtner	Chief Projects Officer

6. GOING CONCERN

The Directors have reviewed the Group’s and Company’s cash flow forecasts up to the period ending May 2022 and, in light of this review and the current financial position, the Directors believe that the Group and Company has adequate financial resources to continue in operation for the foreseeable future and accordingly the Consolidated and Separate Annual Financial Statements have been prepared on a going concern basis. The Directors have satisfied themselves that the Group and Company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The Directors are not aware of any new material changes that may adversely impact the Group and Company. The Directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the Group and Company. Please refer to note 40 for further information.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Directors’ Report continued

7. EVENTS AFTER THE REPORTING PERIOD

The Directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

8. INDEPENDENT AUDITOR

BDO South Africa was appointed as auditors for the Company and its subsidiaries for 2021. This is the first year that BDO South Africa served as the designated auditor of the Group.

At the annual general meeting, the shareholders will be requested to reappoint BDO South Africa, together with Paul Badrick as the designated auditor, as the external audit firm of the Company for the 2022 financial year.

9. COMPANY SECRETARY

The Company Secretary is FluidRock Co Sec Proprietary Limited.

Business address: Block 5, Suite 201 Monument Office Park Pretoria 0181

10. DATE OF AUTHORISATION FOR ISSUE OF FINANCIAL STATEMENTS

The Consolidated and Separate Annual Financial Statements have been authorised for issue by the Directors on 17 May 2021.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Independent Auditor’s Report

To the Shareholders of Balwin Properties Limited

REPORT ON THE AUDIT OF THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS

OPINION

We have audited the consolidated and separate financial statements of Balwin Properties Limited (the group and company) set out on pages 14 to 59, which comprise the consolidated and separate statements of financial position as at 28 February 2021, and the consolidated and separate statements of profit or loss and other comprehensive income, consolidated and separate statements of changes in equity and the consolidated and separate statements of cash flows for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Balwin Properties Limited as at 28 February 2021 and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of Consolidated and Separate Financial Statements section of our report. We are independent of the group and company in accordance with the Independent Regulatory Board of Auditors’ Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter

Recognition of cost of sales (Consolidated and separate financial statements)

The cost of sales recognised upon sale of residential units are calculated by apportioning the total forecasted costs of the respective development, to the square meterage of the unit disposed as a percentage of the total square meterage of the development.

Significant judgement is required by the directors in determining the total forecasted costs of completion. This is determined based on significant assumptions in determining the estimated future costs and the development plan for the respective developments.

Due to significance of the cost of sales total in the financial statements, combined with the judgements and assumptions associated with determining the forecasted costs, this is considered a key audit matter.

The accounting policy for the recognition of costs of sales is disclosed under note 1.2 on page 18, and the actual cost of sales is disclosed in the statement of profit or loss and other comprehensive income.

Our audit procedures incorporated a combination of tests of the Group and Company’s controls relating to the forecasting of the costs to complete the developments and substantive procedures.

Our procedures included the following:

Cost of goods recognised

• We assessed the design and implementation of the controls relating to the forecasting of the total costs per development.

• This included attendance at a property budget meeting where the forecasts per development are discussed and approved.

• Obtained and inspected the development forecasts and confirmed these were reviewed and approved by the directors.

• Assessed the assumptions included in the forecasts which are used to determine the total cost to complete each development under construction.

• For developments which concluded during the year we reviewed and compared the total actual development costs to the initial forecasted development costs in order to assess the Group and Company’s forecasting ability.

• Created an expectation of cost of sales in the current year based on prior year cost of sales recognised per square meter and compare this to actual cost of sales recognised in the current year.

• Performed a number of substantive analytical procedures in order to assess the reasonability of the forecasts as well as cost of sales.

• Performed reasonability tests on the forecast costs based on the percentage of units sold and compared this to the total cost of sales recognised for that development during the year and obtained reasons for any significant differences.

• Performed an assessment on managements expert in order to assess the competence and ability to forecast the costs appropriately.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Independent Auditor’s Report continued

OTHER INFORMATION

The directors are responsible for the other information. The other information comprises the information included in the documents titled “Balwin Properties Limited Integrated Annual Financial Statements and Annual Financial Statements for the year ended 28 February 2021”, which includes the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate as required by the Companies Act of South Africa. The other information does not include the consolidated and separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and/or the company or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s and the company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group and/or the company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that BDO South Africa Incorporated has been the auditor of Balwin Properties Limited for one year.

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BDO South Africa Incorporated

Registered Auditors

Paul Badrick

Director Registered Auditor

17 May 2021

Wanderers Office Park 52 Corlett Drive Illovo, 2196

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Statements of Financial Position

As at 28 February 2021

Notes	Group Company
	2021 R’000 2020 R’000 2021 R’000 2020 R’000
Assets Non-Current Assets Property, plant and equipment 3 Intangible assets 4 Investments in subsidiaries 5 Investment in associate 6 Loans to external parties 7	99 810 90 654 49 894 54 318 15 256 9 049 14 491 8 993 – – * * 2 067 323 2 067 323 11 658 – 11 658** –
	128 791 100 026 78 110 63 634
Current Assets Developments under construction 8 Loans to related parties 9 Current tax receivable Trade and other receivables 10 Development loans receivable 11 Restricted cash 12 Cash and cash equivalents 13	4 121 257 3 369 972 4 121 257 3 369 972 14 112 14 112 24 418 62 668 5 865 15 812 5 865 15 812 695 034 597 208 685 912 591 599 68 181 34 078 68 181 34 078 31 390 – 31 390 – 336 533 476 532 331 256 471 746
	5 272 372 4 507 714 5 268 279 4 545 875
Total Assets	5 401 163 4 607 740 5 346 389 4 609 509
Equity and Liabilities Equity Share capital 14 Share-based payment reserve Retained income	663 079 652 978 663 079 652 978 6 778 9 900 6 778 9 900 2 532 804 2 288 762 2 530 450 2 290 865
Non-controlling interest Total equity	3 202 661 2 951 640 3 200 307 2 953 743 (41) (250) – – 3 202 620 2 951 390 3 200 307 2 953 743
Liabilities Non-Current Liabilities Development loans and facilities 15 Lease liabilities 16 Deferred taxation 17	225 605 252 639 225 605 252 639 2 170 2 923 2 170 2 923 159 659 99 882 160 687 101 725
	387 434 355 444 388 462 357 287
Current Liabilities Development loans and facilities 15 Trade and other payables 18 Lease liabilities 16 Employee benefits 19	1 675 884 1 167 057 1 625 884 1 167 057 104 896 111 253 101 697 109 074 753 621 753 621 29 576 21 975 29 286 21 727 1 811 109 1 300 906 1 757 620 1 298 479
Total Liabilities	2 198 543 1 656 350 2 146 082 1 655 766
Total Equity and Liabilities	5 401 163 4 607 740 5 346 389 4 609 509

• Denotes a value of less than R1 000.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Statements of Profit or Loss and Other Comprehensive Income

For the year ended 28 February 2021

Note	Group Company
	2021 R’000 2020 R’000 2021 R’000 2020 R’000
Revenue 20 Cost of sales	2 700 574 2 914 453 2 675 222 2 898 849 (1 979 598) (2 124 703) (1 975 927) (2 116 210)
Gross profit Other income 22 Operating expenses	720 976 789 750 699 295 782 639 6 652 19 847 4 793 18 773 (265 178) (235 613) (248 626) (224 967)
Operating profit 23 Investment income 24 Finance costs 25 Share of profit of associate 6	462 450 573 984 455 462 576 445 16 936 13 673 16 873 13 530 (14 079) (12 643) (12 509) (12 643) 1 744 322 1 744 322
Profit before taxation Taxation 26	467 051 575 336 461 570 577 654 (130 686) (163 976) (129 871) (164 439)
Profit for the year Other comprehensive income net of income tax: Items that may be reclassified to profit or loss: Exchange profit on translating foreign operation	336 365 411 360 331 699 413 215 – 36 –
Total comprehensive income for the year	336 365 411 396 331 699 413 215
Profit attributable to: Owners of the parent Non-controlling interest	336 156 411 610 331 699 413 215 209 (250) – –
	336 365 411 360 331 699 413 215
Total comprehensive income attributable to: Owners of the parent Non-controlling interest	336 156 411 646 331 699 413 215 209 (250) – –
	336 365 411 396 331 699 413 215
Basic and diluted earnings per share Basic (cents) 33 Diluted (cents) 33	71.67 88.02 71.19 87.17

15

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Statements of Changes in Equity For the year ended 28 February 2021

					Total
		Foreign			attributable
		currency	Share-based		to equity	Non-
	Share	translation	payment	Retained	holders of	controlling	Total
	capital	reserve	reserve	income	the Group	interest	equity
	R’000	R’000	R’000	R’000	R’000	R’000	R’000
Group
Balance at
1 March 2019	652 978	(477)	*	2 001 355	2 653 856	–	2 653 856
Profit for the year	–	–	–	411 610	411 610	(250)	411 360
Other comprehensive
income	–	36	–	–	36	–	36
Total comprehensive
income for the year	–	36	–	411 610	411 646	(250)	411 396
Transfer between
reserves	–	441	–	(441)	–	–	–
Share-based payment	–	–	9 900	–	9 900	–	9 900
Dividends paid	–	–	–	(123 762)	(123 762)	–	(123 762)
Balance at
1 March 2020	652 978	–	9 900	2 288 762	2 951 640	(250)	2 951 390
Profit for the year	–	–	–	336 156	336 156	209	336 365
Other comprehensive
income	–	–	–	–	–	–	–
Total comprehensive
income for the year	–	–	–	336 156	336 156	209	336 365
Issue of shares from
treasury	10 101	–	(10 101)	–	–	–	–
Share-based payment	–	–	6 979	–	6 979	–	6 979
Dividends paid	–	–	–	(92 550)	(92 550)	–	(92 550)
Dividends received from
treasury shares	–	–	–	436	436	–	436
Balance at
28 February 2021	663 079	–	6 778	2 532 804	3 202 661	(41)	3 202 620
Note	14		21
Company
Balance at
1 March 2019	652 978	–	*	2 001 412	2 654 390	–	2 654 390
Profit for the year	–	–	–	413 215	413 215	–	413 215
Other comprehensive
income	–	–	–	–	–	–	–
Total comprehensive
income for the year	–	–	–	413 215	413 215	–	413 215
Share-based payment	–	–	9 900	–	9 900	–	9 900
Dividends paid	–	–	–	(123 762)	(123 762)	–	(123 762)
Balance at
1 March 2020	652 978	–	9 900	2 290 865	2 953 743	–	2 953 743
Profit for the year	–	–	–	331 699	331 699	–	331 699
Other comprehensive
income	–	–	–	–	–	–	–
Total comprehensive
income for the year	–	–	–	331 699	331 699	–	331 699
Issue of shares from
treasury	10 101	–	(10 101)	–	–	–	–
Share-based payment	–	–	6 979	–	6 979	–	6 979
Dividends paid	–	–	–	(92 550)	(92 550)	–	(92 550)
Dividends received from
treasury shares	–	–	–	436	436	–	436
Balance at
28 February 2021	663 079	–	6 778	2 530 450	3 200 307	–	3 200 307
Note	14

* Denotes a value of less than R1 000.

16

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Statements of Cash Flows

For the year ended 28 February 2021

Note	Group Company
	2021 R’000 2020 R’000 2021 R’000 2020 R’000
Cash flows from operating activities Cash (used in)/generated from operations 27 Interest received Finance costs paid Taxation paid 28	(400 703) 581 402 (411 282) 582 373 16 936 12 680 16 873 12 537 (40 111) (95 258) (38 541) (95 258) (60 962) (104 514) (60 962) (104 514)
Net cash (used in)/generated from operating activities	(484 840) 394 310 (493 912) 395 138
Cash flows from investing activities Purchase of property, plant and equipment 3 Proceeds on sale of property, plant and equipment Purchase of intangible assets 4 Loans to Group companies repaid Loans advanced to related parties Loans advanced to external parties	(25 597) (24 816) (5 826) (9 150) 592 13 002 383 13 002 (7 235) (3 468) (6 466) (3 401) – – 38 250 – – (4 131) – (20 522) (11 658) – (11 658) –
Net cash (used in)/generated from investing activities	(43 898) (19 413) 14 683 (20 071)
Cash flows from financing activities Development loans repaid Development loans raised and utilised Investment loan and general banking facilities repaid Investment loan and general banking facilities raised and utilised Payment on lease liabilities Dividends paid Dividends received from treasury shares	(1 092 247) (1 216 242) (1 092 247) (1 216 242) 1 429 710 1 080 077 1 379 710 1 080 077 (158 280) (126 100) (158 280) (126 100) 302 610 158 280 302 610 158 280 (940) – (940) – (92 550) (123 762) (92 550) (123 762) 436 – 436 –
Net cash generated from/(used in) financing activities	388 739 (227 747) 338 739 (227 747)
Total cash and cash equivalents movement for the year Cash and cash equivalents at the beginning of the year	(139 999) 147 150 (140 490) 147 320 476 532 329 382 471 746 324 426
Total cash and cash equivalents at end of the year 13	336 533 476 532 331 256 471 746

• Denotes a value of less than R1 000.

17

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Accounting Policies

1. PRESENTATION OF CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS

The consolidated and separate financial statements, comprising Balwin Properties Limited (referred to as “the Company”) and its subsidiaries (altogether referred to as “the Group” or “consolidated”), incorporate the following principal accounting policies, set out below. In these accounting policies “the Group” refers to both the Group and Company.

The principal accounting policies, set out below have been applied consistently for all periods presented in the Annual Financial Statements and have been consistently applied by the Group, unless otherwise stated.

The Consolidated and Separate Annual Financial Statements have been consistently prepared in accordance with International Financial Reporting Standards (“IFRS”) and its interpretations adopted by the Independent Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act 2008 of South Africa (“the Companies Act”) and the JSE Listings Requirements.

The Consolidated and Separate Annual Financial Statements have been prepared on the historic cost convention, and incorporate the principal accounting policies set out below. They are presented in South African Rands, which is also the functional currency of the Company, and are rounded to the nearest R’000.

This report was externally compiled under the supervision of Jonathan Weltman CA(SA), the Chief Financial Officer. These financial statements have been audited in compliance with all applicable requirements of the Companies Act and were authorised for issue on 17 May 2021.

1.1 CONSOLIDATION

Basis of consolidation

The Consolidated and Separate Annual Financial Statements incorporate the financial statements of the Company and its subsidiaries. A subsidiary is an entity (including structured entities) that is controlled by the Group.

The Group has control of an entity when it is exposed to or has rights to variable returns from involvement with the entity and it has the ability to affect those returns through use of its power over the entity. The results of the subsidiary is included in the Consolidated and Separate Annual Financial Statements from the effective date of acquisition (being the date on which control commences) to the effective date of disposal (being the date on which control ceases).

The accounting policies of the subsidiaries are consistent with those of the holding Company. Where necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting policies in line with those of the Group. All inter-Company transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the Group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions and are recognised directly in the Statements of Changes in Equity.

1.2 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY

In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts represented in the financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the Annual Financial Statements. There is no use of significant judgement in the preparation of the financial statements. Significant sources of estimation uncertainty include:

Assumptions and estimation uncertainties

Recognition of cost of constructed residential apartments sold

The Group uses certain assumptions and key factors in the management of, and reporting for, the recognition of the cost of constructed residential apartments sold. The assumptions are material and relate to the estimation of the forecasted total project cost of the respective developments. These assessments include a degree of inherent uncertainty when estimating these costs. These costs are allocated to the apartments on a participation quotient methodology upon recognising the revenue upon the sale. The estimation of the total project cost is performed by an in-house qualified quantity surveyor and are subject to monthly review. All project forecasts are presented to the executive Directors for approval at regular intervals throughout the year.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Accounting Policies

1.2 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY continued

Net realisable value of developments under construction

The Group conducts regular reviews of the net realisable value of its developments under construction. No write-down to net realisable values were necessitated from the reviews performed. The reviews were conducted on a development by development basis, using methodologies that incorporate project revenues and development costs, and based on management’s assessment of market conditions existing at the date of review.

Preparation of cash flow forecasts

The application of judgement is inherent in the preparation of cash flow forecasts which are used by the Group in support of the going concern assumption, the ability to utilise its assessed taxation losses and the recoverability of loans owing from Group companies.

The forecasts are based on the expected cash flows arising from the approved development programme of the Company which is approved by the executive Directors. The apartments included in the cash flow forecasts are included on a stepped inclusionary basis per each phase of each development. The inclusion rates are based on a balance of historic information and current sales trends and are applied specifically to the relevant phase. The construction related costs are forecasted by the in-house qualified quantity surveyors. Funding is based on existing and forecasted bank terms based on the average 70% loan-to-cost funding principle and according to the construction timelines per the development schedule. All funding and land repayments are forecasted per the terms of the respective agreements.

The 12-month cash flows are presented to the Board for approval quarterly.

1.3 PROPERTY, PLANT AND EQUIPMENT

It is the Group’s policy to hold property, plant and equipment at cost less accumulated depreciation, subject to the requirement to test assets for impairment. Depreciation on property, plant and equipment is provided using the straight-line method to write off the cost less any estimated residual value, over the estimated useful lives on the following basis:

Item	Depreciation method	Average useful life
Buildings	Straight line	20 years
Plant and machinery	Straight line	4 years
Furniture and fixtures	Straight line	6 years
Motor vehicles	Straight line	5 years
Office equipment	Straight line	5 years
Computer equipment	Straight line	3 – 5 years

The useful lives are for the current and comparative period.

The right-of-use asset is depreciated over the shorter of its useful life or the term of the lease. Accordingly, the lease of the Western Cape office building is depreciated over five years.

No depreciation is provided on freehold land that is not used for development purposes. All land that is held for the purposes of development is accounted for as developments under construction. Refer to note 1.10 for further detail. The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate.

The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset. The depreciation charge on items of property, plant and equipment that are directly attributable to the construction of residential apartments are capitalised to developments under construction.

An impairment loss is recognised in profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. Any reversal of a previous impairment is limited so that the increased value does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. Any gain or loss arising from the disposal of an item of property, plant and equipment is included in profit or loss when the item is derecognised.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Accounting Policies

1.4 INTANGIBLE ASSETS

Intangible assets are initially recognised at cost and are subsequently measured at cost less any accumulated amortisation and any impairment losses. Intangible assets are amortised on a straight line basis over their useful life and subjected to an annual assessment of impairment, or more regularly should an indicator of impairment exist during the year.

The useful life and amortisation method of the intangible assets are reviewed on an annual basis. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate.

Item	Depreciation method	Average useful life
Licences	Straight line	10 years
Solar infrastructure contributions	Straight line	15 years
Computer software	Straight line	3 years

The useful lives are for the current and comparative period.

1.5 LEASES

The Group assesses whether a contract is, or contains a lease, at the inception of the contract.

A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

In order to assess whether a contract is, or contains a lease, management determine whether the asset under consideration is “identified”, which means that the asset is either explicitly or implicitly specified in the contract and that the supplier does not have a substantial right of substitution throughout the period of use. Once management has concluded that the contract deals with an identified asset, the right to control the use thereof is considered. To this end, control over the use of an identified asset only exists when the Group has the right to substantially all of the economic benefits from the use of the asset as well as the right to direct the use of the asset.

In circumstances where the determination of whether the contract is or contains a lease requires significant judgement, the relevant disclosures are provided in the significant judgments and sources of estimation uncertainty section of these accounting policies.

Group as lessee

A lease liability and corresponding right-of-use asset are recognised at the lease commencement date, for all lease agreements for which the Group is a lessee, except for short-term leases of 12 months or less, or leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense (note 23) on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

The various lease and non-lease components of contracts containing leases are accounted for separately, with consideration being allocated to each lease component on the basis of the relative stand-alone prices of the lease components and the aggregate stand-alone price of the non-lease components (where non-lease components exist).

However, as an exception to the preceding paragraph, the Group has elected not to separate the non-lease components for leases of land and buildings.

Details of leasing arrangements where the Group is a lessee are presented in note 16 Lease liabilities (Group as lessee).

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed lease payments, including in-substance fixed payments, less any lease incentives;

• variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

• the amount expected to be payable by the Group under residual value guarantees;

• the exercise price of purchase options, if the Group is reasonably certain to exercise the option;

• lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option; and

• penalties for early termination of a lease, if the lease term reflects the exercise of an option to terminate the lease.

20

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Accounting Policies

1.5 LEASES continued

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability (or right-ofuse asset). The related payments are recognised as an expense in the period incurred and are included in operating expenses.

The lease liability is presented as a separate line item on the Statement of Financial Position.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect lease payments made. Interest charged on the lease liability is included in finance costs (note 25).

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) when:

• there has been a change to the lease term, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

• there has been a change in the assessment of whether the Group will exercise a purchase, termination or extension option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

• there has been a change to the lease payments due to a change in an index or a rate, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used);

• there has been a change in expected payment under a residual value guarantee, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate; and

• a lease contract has been modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised payments using a revised discount rate.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recognised in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Right-of-use assets

Right-of-use assets are presented within property, plant and equipment and classified with assets of the same category.

Lease payments included in the measurement of the lease liability comprise the following:

• the initial amount of the corresponding lease liability;

• any lease payments made at or before the commencement date;

• any initial direct costs incurred;

• any estimated costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, when the Group incurs an obligation to do so, unless these costs are incurred to produce inventories; and

• less any lease incentives received.

Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. However, if a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. Depreciation starts at the commencement date of a lease.

For right-of-use assets which are depreciated over their useful lives, the useful lives are determined consistently with items of the same class of property, plant and equipment. Refer to the accounting policy for property, plant and equipment for details of useful lives.

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ from previous estimates, the change is accounted for prospectively as a change in accounting estimate. Each part of a right-of-use asset with a cost that is significant in relation to the total cost of the asset is depreciated separately.

The depreciation charge for each year is recognised in profit or loss unless it is included in the carrying amount of another asset.

21

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Accounting Policies

1.6 INVESTMENTS IN SUBSIDIARIES

In the Company’s separate Annual Financial Statements, the investments in subsidiaries are carried at cost, being the aggregate of the fair value of the subsidiary on the date of acquisition plus any costs directly attributable to the purchase thereof less any accumulated impairment losses.

1.7 INVESTMENT IN ASSOCIATE

Associates are all entities over which the Group has significant influence but not control. The Group’s interests in associates are accounted for using the equity method.

On initial recognition the investment in associate is recognised at cost and subsequently the carrying amount is increased or decreased to recognise the Group’s share of the net assets of the associate after date of acquisition. The Group’s share of the associate’s profit or loss is recognised in profit or loss, outside of operating profit and represents profit or loss after tax of the associate. Where there has been a change recognised directly in other comprehensive income or equity of the associate the Group recognises its share of any changes and discloses this, where applicable, in the Group statement of other comprehensive income or Group statement of changes in equity. Distributions received from the associate reduce the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interests in the associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate.

1.8 FINANCIAL INSTRUMENTS

Classification, measurement and derecognition

There has been no change in the classification and measurement of the Group’s financial assets and financial liabilities nor have any financial instruments been derecognised in the current or prior periods.

Impairment model

The Group followed the expected credit loss model in recognising any impairment of financial assets. The expected credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets.

Classification of financial asset and financial liabilities

Financial assets

The Group classifies its financial assets on the basis of its business model for managing the financial assets and their contractual cash flow characteristics. The Group’s financial assets are measured at amortised cost.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk has increased significantly since initial recognition based on a provision matrix:

• country credit risk – country credit risk was assessed using the Coface Credit risk assessment map and by applying a risk rating based on the country rating;

• customer default risk – each financial asset is assessed by considering the risk of default or liquidation by reference to available financial information including budgets and forecasts where possible or from information obtained either internally or from external sources that provides an indication of liquidity concerns of the customer;

• customer risk – customer risk is assessed on an individual basis by considering payment history and relationships with customers;

• government institution exposure – due to the nature of the operations, the Group has to incur costs in terms of contributions made for bulk services on behalf of local municipalities which gives rise to exposure to credit from government institutions. Contributions relating to bulk services is managed very carefully and incorporates the assistance of independent external professionals and thus based on its profile, a separate risk rating has been applied to these financial assets; and

• size of financial asset – The value of each financial asset in relation to the total value of financial assets is considered in terms of a risk rating matrix. The risk rating matrix applies a bigger risk rating to the larger value financial assets.

22

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Accounting Policies

1.8 FINANCIAL INSTRUMENTS continued

The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk.

Based on historical experience the Group considers information developed internally or obtained from external sources which indicates that the debtor is unlikely to pay creditors, including the Group to constitute an event of default for internal credit risk management purposes.

The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and the exposure at default.

The Group recognises an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

The amounts are written off when they are deemed by management to be unrecoverable.

Financial liabilities

The Group classifies their financial liabilities at amortised cost.

Initial recognition and measurement of financial instruments

Financial instruments are recognised when the Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are measured at fair value on initial recognition.

For financial assets and financial liabilities that are not at fair value through profit or loss, transactions costs are included in the initial measurement of the instrument.

Subsequent measurement

Financial assets and financial liabilities are subsequently measured in accordance with the initial classification category. Financial assets and financial liabilities are subsequently measured at amortised cost using the effective interest method.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Financial liabilities are derecognised when their contractual obligation is discharged or cancelled, or expire. Financial liabilities are also derecognised when their terms are modified and the cash flows of the modified liabilities are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on instruments that are measured at amortised cost. The amount of expected credit losses (“ECL”) is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. Considering the nature of the financial assets in the Group, the Group measures the loss allowance at an amount equal to 12-month ECL. Twelve-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognises an allowance for expected credit losses for all debt instruments not held at fair value through profit or loss. Expected credit losses are based on the difference between the contracted cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate.

Based on the nature of the Group’s operations whereby the apartments are either sold for a cash consideration or where preapproved bank finance is in place, there is limited judgement applied in determining any expected credit loss with respect to trade receivables. Loans to related parties are assessed for recoverability based on review of financial forecasts of the underlying Company. Consideration is given to the nature of items included in other receivables in order to support the recoverability of the financial asset.

Loans to related parties

The loans to the related parties are recognised initially at fair value plus direct transactional costs and are subsequently measured at amortised cost.

23

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Accounting Policies

1.8 FINANCIAL INSTRUMENTS continued

Trade and other receivables

Trade and other receivables are initially recognised at fair value, and are subsequently measured at amortised cost using the effective interest method. The Group holds trade receivables with the objective to collect contractual cash flows. The receivables relating to the apartments handed over but not yet registered create a unconditional right to the funds receivable. The amounts receivable relates purely to a timing difference between handover of the apartment and the subsequent registration thereof in the deeds office.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

Development loans and facilities

Development loans and facilities payable and receivable are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of the loans are recognised over the term of the loan in accordance with the Group’s accounting policy for borrowing costs.

Write-off

The gross carrying amounts of financial assets is written off when the Group has no reasonable expectation of recovering the financial asset in its entirety or a portion thereof. The Group expects no significant recovery from amounts written off.

1.9 TAX

Current tax assets and liabilities

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated Statement of Financial Position differs from its tax base, except for differences arising on:

• The initial recognition of goodwill;

• The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit, and

• Investments in subsidiaries and joint arrangements where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

When there is uncertainty concerning the Group’s filing position regarding the tax bases of assets or liabilities, the taxability of certain transactions or other tax-related assumptions, then the Group:

• Considers whether uncertain tax treatments should be considered separately, or together as a Group, based on which approach provides better predictions of the resolution;

• Determines if it is probable that the tax authorities will accept the uncertain tax treatment; and

• If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• The same taxable Group Company, or

• Different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

24

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Accounting Policies

1.9 TAX continued

Tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from:

• a transaction or event which is recognised, in the same or a different period, to other comprehensive income; or

• an over/under provision of tax may be recorded in the current period but relate to the prior period. This may occur where the final tax which had been assessed by SARS is different to that of the initial recording in the prior year financial statements.

1.10 DEVELOPMENTS UNDER CONSTRUCTION

Developments under construction comprise the cost of the land, development rights and construction related expenditure which comprises direct materials, labour costs, site overheads, associated professional charges and other attributable overheads. Developments under construction are stated at the lower of cost and net realisable value.

Cost includes all of the expenditure which is directly attributable to the acquisition of the land or construction of residential estates/apartments, including the capitalisation of borrowing costs that are incurred on the development loans. The construction of residential estates/apartments is a qualifying asset in terms of IAS 23, Borrowing costs, and accordingly borrowing costs are capitalised to the extent that they are directly attributable to the acquisition and construction of the estate/ apartment. Refer to the accounting policy in note 1.16 for further detail on borrowing costs.

Although the operating cycle for developments under construction is considered to be longer than 12 months due to the fact that they are held primarily for the purposes of trading and are expected to be realised in the entity’s normal operating cycle, the asset is classified as current in accordance with the presentation requirements of IAS 1, Presentation of Financial Statements. The operating cycle is normally between one to five years.

1.11 IMPAIRMENT OF NON-FINANCIAL ASSETS

The Group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the individual asset using an estimated credit loss assessment.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and is recognised immediately in profit or loss.

The Group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated and the expense recorded in profit or loss. Any subsequent reversal of impairments is recorded as a credit in operating expenses in profit or loss.

1.12 SHARE CAPITAL AND EQUITY

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Ordinary shares are recognised at par value and classified as ‘‘share capital’’ in equity. Any amounts received from the issue of shares in excess of par value is classified as ‘‘share premium’’ in equity.

Treasury shares

Ordinary shares in Balwin Properties Limited which have been acquired by the Group in terms of an approved share repurchase programme, are classified as treasury shares. The cost of these shares is deducted from equity and the number of shares is deducted from the weighted average number of shares. When treasury shares are sold or reissued the amount received is recognised as an increase in equity and the resulting surplus or deficit over the cost of these shares on the transaction is transferred to or from distributable reserves.

1.13 EMPLOYEE BENEFITS

Short-term employee benefits and provisions

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected costs of bonus payments and leave pay are recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

The respective costs are disclosed as employee benefits in the financial statements.

25

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Accounting Policies

1.14 REVENUE

Revenue from contracts with customers

The Group recognises revenue from the following major sources:

• Revenue from the sale of developed residential apartments;

• Revenue from the sale of undeveloped land;

• Bond commission; and

• Rental of electronic communication.

Other revenue

The Group recognises other revenue from:

• Donation income.

Donation income is recognised in profit or loss when the Group’s right to receive payment has been established. This represents the date on which control is transferred. Donations are received by The Balwin Foundation NPC.

Revenue is recognised at a point in time on the following basis:

• Given the nature of the core operations of the Company, revenue from the sale of apartments is based on a contract with the customer. The only performance obligation pertains to the successful handover of the apartment to the buyer which will only take place provided that financial guarantees are in place or the registration of the apartment in the deeds office. This represents the date on which control of the apartment transfers to the customer. Payment is due to the Company upon the registration of the apartment, or, if earlier, the handover date. The transaction price is defined per the sales agreement.

• From time to time, the Company disposes of land on which it does not intend to develop. Revenue on the sale of land is recognised on the transfer of the property. The transaction price is stipulated per the sales agreement.

• The Company earns bond commission from contractual commission arrangements with bond granters based on the underlying value of the funding procured. Balwin has an in-house bond origination department that co-ordinates and facilitates mortgages on behalf of financial institutions. The performance obligation is satisfied upon the registration of the bond, which represents the timing of the transfer of control.

Revenue is recognised over time on the following basis:

• Revenue derived from the rental of electronic communication is determined on a contractual basis between Balwin Fibre Proprietary Limited and the respective internet service provider. The contracts between Balwin Fibre Proprietary Limited and the internet service providers are on a month-to-month basis and can be terminated by either party by giving one months’ notice. Revenue is recognised over time as the services are provided. A fixed fee is charged to the internet service provider for each fibre line used. The Group applies the practical expedient to recognise revenue at the amount to which it has a right to invoice, which corresponds directly to the value to the customer of the Group’s performance completed to date.

IFRS 15 uses the terms “contract asset” and “contract liability” to describe what might more commonly be known as “accrued revenue” and “deferred revenue”, however, the Standard does not prohibit an entity from using alternative descriptions in the statement of financial position. The Group has adopted the terminology used in IFRS 15 to describe such balances. The Group only has contract liabilities as the Group’s rights to considerations due are unconditional.

The Group shall present the contract as a contract liability when it receives a pre-payment from a customer subject to all performance obligations being fulfilled. A contract liability is the Group’s obligation to transfer the apartment to a customer for which the Group has received consideration.

Revenue is recognised at the amount of the transaction price that is allocated to each performance obligation. The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

The Group has determined that its contracts with customers do not contain a significant financing component.

26

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

continued Accounting Policies

1.15 OTHER INCOME

Other income includes other items of income not derived from the main activities of the Group. Interest income is recognised as interest accrues using the effective interest method.

1.16 BORROWING COSTS

Borrowing costs that are directly attributable to the acquisition and construction of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The construction of residential estates/apartments is a qualifying asset in terms of IAS 23. The amount of borrowing costs eligible for capitalisation is determined based on the actual borrowing costs on development loans specifically borrowed for the purpose of the acquisition and construction of the estate/apartment less any temporary investment of those borrowings.

The capitalisation of borrowing costs commences when:

• expenditures for the asset have occurred;

• borrowing costs have been incurred; and

• activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted. Capitalisation ceases when substantially all the activities necessary to prepare the residential estate for its intended use or sale are complete. All other borrowing costs are recognised as an expense in the period in which they are incurred.

1.17 TRANSLATION OF FOREIGN CURRENCIES

Foreign currency transactions

A foreign currency transaction is recorded, on initial recognition in Rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction and translated at the end of the reporting period at the appropriate rate of conversion. Any exchange differences are recognised in profit or loss in the period in which they arise.

1.18 SHARE-BASED PAYMENTS

Old Scheme

The Group issued equity settled options to qualifying interested investors on listing. Equity settled Share-based payments are measured at fair value on grant date as there are no service conditions. The fair value determined at the grant date of the equity settled Share-based payments is expensed on grant date due to a service condition not being a vesting condition. Fair value is measured by use of a modified Black-Scholes model. The assumptions used in the model are based on management’s best estimate, for the effects of non-transferability, exercise restrictions, volatility and behavioural considerations.

New Scheme

The Group issued equity settled options to executives and senior management as part of the long-term incentive program. Allowance is made for the offer of rights in the form of bonus shares, performance shares and/or retention shares. Equity settled Share-based payments are measured at fair value on grant date. The fair value determined at the grant date of the equity settled Share-based payments is expensed on a straight-line basis over the vesting period and a corresponding Share-based payment reserve is recognised in the statement of financial position. The options were priced using a 30-day volume weighted average share price.

1.19 EXPENSES

Expenses, other than those specifically dealt with in another accounting policy, are recognised in profit or loss when as incurred.

27

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

continued Accounting Policies

1.20 SEGMENTAL REPORTING

The geographical segments of the South African operations as well as the operational segments of the residential property development and rental of electronic communication have been identified as segments in the Group as they provide services within different economic environments or based on different nature of operations. The environments are subject to risks and returns that differ from the respective segments. No segmental reporting disclosure is prepared as this is not considered useful to the users of the financial statements based on the quantitative thresholds of the identified segments.

1.21 EARNINGS PER SHARE

The calculation of earnings per share is based on profit for the period attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period. Headline earnings per share are calculated in accordance with Circular 1/2019 issued by the South African Institute of Chartered Accountants.

1.22 DIVIDENDS

Dividends are accounted for on the date of declaration and are not accrued as a liability in the financial statements until declared.

2. NEW STANDARDS AND INTERPRETATIONS

2.1 STANDARDS AND INTERPRETATIONS EFFECTIVE AND ADOPTED IN THE CURRENT YEAR

In the current year, the Group has adopted the following standards and interpretations that are effective for the current financial year and that are relevant to its operations. The below standards and interpretations adopted in the current year did not have a material impact on the Group.

not have a material impact on the Group.
	Effective date:
Standard/Interpretation:	Years beginning on or after
Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7	1 January 2020
Definition of a business – Amendments to IFRS 3	1 January 2020
Presentation of Financial Statements: Disclosure initiative	1 January 2020
Accounting Policies, Changes in Accounting Estimates and Errors: Disclosure initiative	1 January 2020

2.2 STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE

The Group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the Group’s accounting periods beginning on or after 1 March 2021 or later periods:

	Effective date:
Standard/Interpretation:	Years beginning on or after
Classification of Liabilities as Current or Non-Current – Amendment to IAS 1	1 January 2023
Reference to the Conceptual Framework: Amendments to IFRS 3	1 January 2022
Annual Improvement to IFRS Standards 2018–2020: Amendments to IFRS 9	1 January 2022
Property, Plant and Equipment: Proceeds before Intended Use: Amendments to IAS 16	1 January 2022
Onerous Contracts – Cost of Fulfilling a Contract: Amendments to IAS 37	1 January 2022
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 7	1 January 2021
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9	1 January 2021
Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 16	1 January 2021
Interest Rate Benchmark Reform – Phase 2: Amendments to IAS 39	1 January 2021

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify that ‘‘settlement’’ includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023.

The Directors anticipate that all of the amendments of the above Standards and Interpretations where applicable will be adopted in the consolidated and separate financial statements of the period in which they become effective. The impact of the Standards and Interpretations on the financial statements of the Group in the period of initial application is not considered to have a material impact on the Group.

28

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements

For the year ended 28 February 2021

3. PROPERTY, PLANT AND EQUIPMENT

Group	2021 2020
	Cost R’000 Accumulated depreciation R’000 Carrying value R’000 Cost R’000 Accumulated depreciation R’000 Carrying value R’000
Land and buildings Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Right-of-use asset – office building	44 676 (9 430) 35 246 44 676 (7 447) 37 229 71 666 (21 910) 49 756 51 696 (13 963) 37 733 5 192 (3 567) 1 625 5 013 (2 825) 2 188 16 957 (10 955) 6 002 15 042 (9 171) 5 871 3 305 (2 600) 705 3 256 (2 131) 1 125 10 799 (6 842) 3 957 8 359 (5 165) 3 194 3 977 (1 458) 2 519 3 977 (663) 3 314
Total	156 572 (56 762) 99 810 132 019 (41 365) 90 654
Company Land and buildings Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Right-of-use asset – office building	44 626 (9 426) 35 200 44 626 (7 445) 37 181 11 769 (11 334) 435 11 260 (9 070) 2 190 4 926 (3 470) 1 456 4 742 (2 759) 1 983 16 241 (10 536) 5 705 14 326 (8 895) 5 431 3 295 (2 595) 700 3 246 (2 127) 1 119 10 600 (6 721) 3 879 8 191 (5 091) 3 100 3 977 (1 458) 2 519 3 977 (663) 3 314
Total	95 434 (45 540) 49 894 90 368 (36 050) 54 318

Reconciliation of property, plant and equipment

Group	2021 Opening balance R’000 Additions R’000 Disposals R’000 Depreciation R’000 Closing balance R’000
Land and buildings Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Right-of-use asset – office building	37 229 – – (1 983) 35 246 37 733 20 204 (194) (7 987) 49 756 2 188 209 (15) (757) 1 625 5 871 2 539 – (2 408) 6 002 1 125 49 – (469) 705 3 194 2 596 (36) (1 797) 3 957 3 314 – – (795) 2 519
	90 654 25 597 (245) (16 196) 99 810
Land and buildings Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Right-of-use asset – office building	2020 47 373 50 (7 928) (2 266) 37 229 29 660 15 470 (4 134) (3 263) 37 733 2 814 116 – (742) 2 188 5 162 3 123 – (2 414) 5 871 1 476 212 (27) (536) 1 125 3 001 1 868 (6) (1 669) 3 194 – 3 977 – (663) 3 314
	89 486 24 816 (12 095) (11 553) 90 654

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 29

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

3. PROPERTY, PLANT AND EQUIPMENT continued

Reconciliation of property, plant and equipment

Reconciliation of property,	plant and equipment
Company	2021
	Opening balance R’000 Additions R’000 Disposals R’000 Depreciation R’000 Closing balance R’000
Land and buildings Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Right-of-use asset – office building	37 181 – – (1 981) 35 200
	2 190 509 – (2 264) 435
	1 983 184 – (711) 1 456
	5 431 2 539 – (2 265) 5 705
	1 119 49 – (468) 700
	3 100 2 545 (36) (1 730) 3 879
	3 314 – – (795) 2 519
	54 318 5 826 (36) (10 214) 49 894
Land and buildings Plant and machinery Furniture and fixtures Motor vehicles Office equipment Computer equipment Right-of-use asset – office building	2020
	47 373 – (7 928) (2 264) 37 181 6 324 – (4 134) – 2 190 2 617 57 – (691) 1 983 4 577 3 181 – (2 327) 5 431 1 468 183 (27) (505) 1 119 2 938 1 752 (6) (1 584) 3 100 – 3 977 – (663) 3 314
	65 297 9 150 (12 095) (8 034) 54 318

The depreciation charge on items of property, plant and equipment that are directly attributable to the construction of residential apartments are capitalised to developments under construction. In the current year, R2.3 million was capitalised (2020: R2.4 million).

Details of properties

Details of properties
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Property 1 Block 1 Townsend Office Park, Erf 2979 Bedfordview Extension 59 Township, Gauteng – Purchase price: 23 February 2013 – Additions since purchase	20 310 20 310 20 310 20 310 1 993 1 993 1 993 1 993
	22 303 22 303 22 303 22 303
Property 2 Unit 2 and 3 Townsend Office Park, Erf 2979 Bedfordview Extension 59 Township, Gauteng – Purchase price: 27 February 2018 – Additions since purchase	10 600 10 600 10 600 10 600 2 686 2 686 2 686 2 686
	13 286 13 286 13 286 13 286
Property 3 Unit 5 and 6 Corporate Park, 11 Senembe Crescent, La Lucia Ridge – Purchase price: 13 June 2017	9 037 9 037 9 037 9 037

Registers with details of land and buildings are available for inspection by shareholders or their duly authorised representatives at the registered office of the Company. A mortgage is registered over Block 1, Townsend Office Park, Erf 2979 Bedfordview. No other item of property, plant and equipment acts as security.

30

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

4. INTANGIBLE ASSETS

Group	2021 2020
	Cost R’000 Accumulated amortisation R’000 Carrying value R’000 Cost R’000 Accumulated amortisation R’000 Carrying value R’000
Licences Computer software Solar infrastructure contributions	31 (9) 22 31 (6) 25 836 (71) 765 67 (11) 56 15 964 (1 495) 14 469 9 498 (530) 8 968
Total	16 831 (1 575) 15 256 9 596 (547) 9 049
Company Licences Solar infrastructure contributions	31 (9) 22 31 (6) 25 15 964 (1 495) 14 469 9 498 (530) 8 968
Total	15 995 (1 504) 14 491 9 529 (536) 8 993

Reconciliation of intangible assets

Reconciliation of	intangible assets
Group	2021 2020
	Opening balance R’000 Additions R’000 Amortisation R’000 Closing balance R’000 Opening balance R’000 Additions R’000 Amortisation R’000 Closing balance R’000
Licences 25 – (3) 22 28 – (3) 25 Computer software 56 769 (60) 765 – 67 (11) 56 Solar infrastructure contributions 8 968 6 466 (965) 14 469 6 097 3 401 (530) 8 968
9 049 7 235 (1 028) 15 256 6 125 3 468 (544) 9 049

Company	2021 2020
	Opening balance R’000 Additions R’000 Amortisation R’000 Closing balance R’000 Opening balance R’000 Additions R’000 Amortisation R’000 Closing balance R’000
Licences 25 – (3) 22 28 – (3) 25 Solar infrastructure contributions 8 968 6 466 (965) 14 469 6 097 3 401 (530) 8 968
8 993 6 466 (968) 14 491 6 125 3 401 (533) 8 993

Balwin Properties Limited holds a licence allowing for the provision of electronic communication services. The licence fee is amortised over the period of the licence. The licence has a useful life of 10 years and can be renewed at the end of the period. The contract will not be renewed at the end of the 10-year period. The remaining useful life of the licences is 7 years (2020: 8 years) at year end. The licence has been granted to Balwin Properties Limited, however, the terms of the licence allow the subsidiaries of Balwin Properties Limited to provide all or any services together with all or any other rights granted to it under the licence.

The Company contributes to the capital solar infrastructure costs of Smart PV Proprietary Limited, a Company engaged in the installation of solar which generates renewable energy. Balwin have contractual rights to participate in 33% of the net revenue of this Company. The capital contributions are amortised over the shorter of the useful life of the infrastructure or the term of the contract period being 15 years.

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 31

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

5. INVESTMENTS IN SUBSIDIARIES

Balwin Properties Limited holds the following investments in subsidiaries:

Company

Company
Name of Company Country of incorporation Year end % Holding % 2021 Holding % 2020	Carrying amount 2021 R’000 Carrying amount 2020 R’000
Balwin Fibre Proprietary Limited South Africa February 90% 90% Waltiq Proprietary Limited South Africa February 100% 100% Unlocked Properties 16 Proprietary Limited South Africa February 100% 100%	* * **
	* ***

* denotes a value of less than R1 000

Nature of business of subsidiaries

Waltiq Proprietary Limited and Unlocked Properties 16 Proprietary Limited were both purchased in order to acquire the subsidiary’s existing contract for the future purchase of land. It is the intention of management to deregister both subsidiaries in the near future.

Balwin Fibre Proprietary Limited is a network infrastructure provider of electronic communication services.

Included in the consolidated financial statements of the Group are the results of The Balwin Foundation NPC, a non-profit Company incorporated and domiciled in South Africa. Although not a subsidiary, The Balwin Foundation NPC has been consolidated as it is considered to be controlled by the Group as its Directors are all employees of Balwin. The Balwin Foundation NPC supports and empowers the younger generation and previously disadvantaged to gain greater knowledge and skills through technical vocational education and training of industry-related trades.

The Directors consider the carrying value of the investments in subsidiaries to approximate their fair value. There are no significant restrictions on the ability to access assets and or settle the liabilities of the subsidiaries.

Subsidiaries with non-controlling interests

Summarised Statement of Financial Position

Summarised Statement of Financial Position
	Balwin Fibre
	2021 R‘000 2020 R‘000
Assets Non-current assets Current assets	51 609 38 062 10 115 8 124
Total assets	61 724 46 186
Liabilities Current liabilities	64 339 50 890
Total liabilities	64 339 50 890
Total net liabilities	(2 615) (4 704)
Revenue Other income and expenses	23 679 12 430 (20 772) (14 048)
Proft/(loss) before tax Tax (expenses)/income	2 907 (1 618) (814) 462
Proft/(loss) for the year Other comprehensive income	2 093 (1 156) – –
Total comprehensive proft/(loss)	2 093 (1 156)
Proft/(loss) allocated to non-controlling interests	209 (250)

Balwin Fibre paid no dividends to the non-controlling shareholder during the year. The non-controlling shareholder’s share of equity amounted to R41 082 (2020: R250 431) at the reporting date and its share of profit for the year amounted to R209 349 (2020: share of loss amounted to R250 431).

32

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

6. INVESTMENT IN ASSOCIATE

Balwin Properties Limited holds the following investment in associate:

Group and Company

Group and Company
				%	%	Carrying	Carrying
		Country		ownership	ownership	amount	amount
	Principal	of incor-		interest	interest	2021	2020
Name of Company	activity	poration	Year end	2021	2020	R’000	R’000
	Property
Balwin Rentals Proprietary Limited	investment	South Africa	August	25%	25%	2 067	323

Pursuant to the shareholders agreement, the Company has the right to cast 25% of the votes at shareholder meetings of Balwin Rentals Proprietary Limited. The percentage ownership interest is equal to the percentage voting rights in all cases. Balwin Rentals Proprietary Limited acquires investment properties to derive rental income.

The Directors consider the carrying value of the investment in associate to approximate their fair value. There are no significant restrictions on the ability of the associate to transfer funds in the form of dividends or to repay loans made by the entity.

Summarised financial information of associate

Summarised Statement of Profit or Loss and Other Comprehensive Income

Summarised Statement of Profit or Loss and Other Comprehensive Income
	Balwin Rentals
	2021 R‘000 2020 R‘000
Revenue Cost of sales and expenses	22 442 17 155 (13 098) (14 992)
Proft before taxation Taxation	9 344 2 163 (2 479) (654)
Total comprehensive income	6 865 1 509

Summarised Statement of Financial Position

Summarised Statement of Financial Position
	Balwin Rentals
	2021 R‘000 2020 R‘000
Assets Non-current Current	155 662 156 889 1 086 1 994
Total assets	156 748 158 883
Liabilities Non-current Current	144 886 156 938 3 596 654
Total liabilities	148 482 157 592
Total net assets	8 266 1 291
Reconciliation of net assets to equity accounted investment in associate Interest in associates at percentage ownership	2 067 323
Carrying value of investment in associate	2 067 323
Investment in associate at beginning of year Share of proft of associate	323 1 1 744 322
Investment in associate at end of year	2 067 323

No dividends were received during the current or prior year.

The financial year end of Balwin Rentals Proprietary Limited is August. The most recent audited financial statements available is 31 August 2020. As the difference between the end of the reporting period of the associate and the Company is more than three months, the management accounts as at February 2021 have been used as the basis of the investment in the associate.

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 33

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

7. LOANS TO EXTERNAL PARTIES

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Enterprise development loans	11 658 – 11 658 –

The Group has granted enterprise development loans to selected external parties. The loans are repayable five years from the initial advance of the funding and do not bear interest. The Directors consider the carrying amounts of the loans to approximate their fair values.

8. DEVELOPMENTS UNDER CONSTRUCTION

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Developments under construction	4 121 257 3 369 972 4 121 257 3 369 972
Developments under construction include the following: Cost of construction Land and land contribution costs Development rights	1 635 145 1 307 511 1 635 145 1 307 511 2 014 029 1 560 221 2 014 029 1 560 221 472 083 502 240 472 083 502 240
	4 121 257 3 369 972 4 121 257 3 369 972

Development rights pertains to the rights assigned to Balwin, including all the rights to use the Polofields and the Waterfall Fields properties for the purpose of undertaking the developments located on those land parcels. Balwin does not hold title of the land located at Waterfall but rather the development rights.

The cost of developments under construction recognised as an expense during the current year was R1 979.6 million (2020: R2 124.3 million). No costs previously capitalised to developments under construction were written off in the current year (2020: R0.4 million).

A mortgage bond is in place over certain portions of land which acts as security for the development loans advanced (refer to note 15).

At year end, the following mortgage bonds were registered:

At year end, the following mortgage bonds were registered:
Value of	Value of
mortgage bond	mortgage bond
2021	2020
Land R’000	R’000
Remaining Extent of Portion 14 Farm 197 Olivedale 200 000 First covering mortgage bond Erf 20030 Somerset West 200 000 Erf 20252 Somerset West 300 000 Remainder of Erf 4484, Ballitoville, Registration Division FU, KwaZulu-Natal 600 000 Portion 1 of Erf 4656 Ballitoville, KwaDukuza 228 695 Portion 21 of Erf 27, Cornubia, Registration Division FU, KwaZulu-Natal 360 000 Portion 1 of Holding 20, Holdings 21, 22, 23, 24, 25, 26, 27; Holding 34, Linbro Park Agricultural Holdings 269 262 Portion 537 (a portion of 378) of the Farm Driefontein Number 85 (now known as Lilianton) 300 000 Extension 9 Township, Erven 585 and 586 Lilianton Extension 9) Erf 10087 Macassar 220 000 Retention of a frst covering notarial deed of lease over Portion 822 (a portion of portion 62) of the Farm Waterval 400 000 Erf 1714, 1749, 1750 and 2113 Sitari, City of Cape Town 150 000 Remaining Extent of Erf 1 Sandown 300 000 Erf 2 and Erf 2 of Juksei View Extension 128 250 000 Erf 1737 Zwartkoppies Extension 45 in extent 531653 hectares 300 000 Portion 6 Farm Zwartkoppies 364 JR and Erven 1741–1743 Zwartkoppies Extension 47 100 000 Portions 3, 4 and 6 of Erf 3465, Proposed RE of Erf 3457, Proposed RE of Erf 3434 and Erf 3456 all of Umhlanga Rocks 500 000 Holding 92, 102, 103, 104, 105 and 106 Crowthorne Agricultural Holdings 187 256 Erf 140, 141, 149 and Linbro Park, Extension 169, City of Johannesburg 220 243 Remaining Extent of Portion 1077 of the Farm Rietfontein 375 409 000 Erf 36555 Milnerton and Erf 38435 Milnerton and Erf 2 Richmond Park 250 000 The lease area over portion 865 (a portion of portion 1) of Farm Waterval 5, Registration Division I.R., Gauteng 600 000	200 000 200 000 300 000 600 000 – 360 000 269 262 300 000 220 000 400 000 – 300 000 250 000 300 000 100 000 – 187 256 220 243 – 250 000 600 000
6 344 456	5 056 761

Refer to note 15 for the Development loans and facilities.

34

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

9. LOANS TO RELATED PARTIES

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Subsidiaries Balwin Fibre Proprietary Limited	– – 10 306 48 556
Associates Balwin Rentals Proprietary Limited	14 112 14 112 14 112 14 112
Split between non-current and current portions Non-current assets Current assets	– – – – 14 112 14 112 24 418 62 668
	14 112 14 112 24 418 62 668

The loan to Balwin Fibre Proprietary Limited is unsecured, interest free and has no fixed repayment terms. The full loan to Balwin Fibre Proprietary Limited has been subordinated to other creditors until such time as the Company’s assets fairly valued exceed its liabilities in order to provide the Company with financial support during its start-up phase. Management reviews the forecasts of the Balwin Fibre Proprietary Limited and closely tracks the progress of the subsidiary. The business growth leverages off the production programme of the Group. As such, due to the growth of the Property business, the initial capital requirements of Balwin Fibre Proprietary Limited have proven to be high. Based on management’s review of the forecast of the business, we are comfortable that the full loan is recoverable. This was further supported by the funding obtained by Balwin Fibre Proprietary Limited from a commercial financial institution. Accordingly, approximately 25% of the loan has already been settled post year end.

The loan to Balwin Rentals Proprietary Limited pertains to a shareholder loan in terms of the sales agreement between the parties whereby a 10% vendor loan is advanced by the Company and serves as security for the sales transaction (refer to note 29). The loan earns interest at the prevailing prime rate three years after it is advanced. The loan has no fixed repayment terms. Management reviews the financial results and management accounts of the entity regularly. The entity does not have a history defaulting on its external and internal interCompany loans. Management is satisfied that the expected credit loss on the loan is immaterial.

The loans to related parties are assessed on a regular basis and careful consideration is given to the forecasts of the business. Management has applied the same expected credit loss categories as identified in note 1.8.

The carrying amount of the loans to related parties approximate their fair value.

35

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

10. TRADE AND OTHER RECEIVABLES

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Financial instruments: Trade receivables Amounts due from transferring attorneys Amounts due from body corporates Amounts due from councils and municipalities Other receivables Deposits Allowance for estimated credit losses Non-fnancial instruments: Value added taxation receivable Prepayments	613 996 528 573 608 632 524 812 860 26 140 860 26 140 2 425 10 984 2 425 10 984 52 626 17 964 52 624 17 964 9 456 8 346 6 946 6 654 6 078 6 000 6 078 6 000 (3 406) (955) (3 401) (955) 11 888 156 11 748 – 1 111 – – –
Total trade and other receivables	695 034 597 208 685 912 591 599
Financial instrument and non-fnancial instrument components of trade and other receivables At amortised cost Non-fnancial instruments	682 035 597 052 674 164 591 599 12 999 156 11 748 –
	695 034 597 208 685 912 591 599

Trade receivables in the Company relates to sales where registration of the apartment has not yet transferred, however, revenue has been recognised as the apartment has been handed over to the purchaser and the financial guarantees are in place for the full purchase price.

Amounts owing from transferring attorneys relate to the proceeds and releases that become due to the Company upon the registration of apartments. These amounts are settled by the transferring attorney on registration and the balance represents the registrations that take place on the final day of the financial year.

Amounts due from body corporates pertains to financial assistance provided by the Company to support the liquidity of the body corporate. The amounts are repayable to the Group when the body corporate is able to settle the obligation giving consideration to its own solvency and liquidity position. Balwin continues to provide financial oversight to the body corporate to ensure this position is attained in order for the loan to be settled. No interest is levied on the amount due, unless the body corporate is deemed to be in a position to settle the debt and does not do so. Interest levied to body corporates in the current and prior years is insignificant.

Amounts due from councils and municipalities pertain to costs incurred for contributions made for bulk services on behalf of the local municipality. The contributions are settled in full by council upon the performance by the developer of specified development-related activities.

Trade and other receivables are assessed on a regular basis and provided for based on the expected credit loss categories as identified in note 1.8. Based on the nature of the operations of the Group the credit risk associated with trade and other receivables is remote.

The Directors consider the carrying amount of trade and other receivables to approximate their fair value due to the nature of the financial instrument.

Exposure to credit risk

Trade receivables inherently expose the Group to credit risk, being the risk that the Group will incur financial loss if parties with an obligation to the Group fail to make payments as they fall due.

An allowance of R3.4 million for credit losses have been raised (2020: R1.0 million) based on the simplified approach.

36

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

11. DEVELOPMENT LOANS RECEIVABLE

Development loans receivable are presented at amortised cost, which is net of any loss allowance. There was no loss allowance recognised in the current year (2020: Rnil).

recognised in the current year (2020: Rnil).
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Development loans	68 181 34 078 68 181 34 078

The development loans represents the oversettlement of the development loan liability to the financial institution by the transferring attorney upon the registration of the apartments which acted as security for the development loan obligation. The development loans bear interest at prime linked rates and are expected to be repaid within a short time period and are therefore classified as current. Refer to note 15 for detail on the development loan obligation.

Due to the nature of the development loans receivable, the cash flows are reported on a net basis in the statement of cash flows. This is due to the fact that oversettlement of the repayment represents an activity of the transferring attorney and considering the short-term maturity of the receipts.

The Directors consider the carrying amount of other financial assets to approximate their fair value. Due to the nature of the financial asset, the exposure to estimated credit losses is insignificant.

12. RESTRICTED CASH

RESTRICTED CASH
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Restricted cash	31 390 – 31 390 –

In line with the JSE Proactive Monitoring Findings report, management noted that included in cash and cash equivalents were restricted cash balances which did not meet the definition of cash and cash equivalents. The error was assessed both qualitatively and quantitatively as immaterial and as such comparatives have not been restated. Restricted cash represents guarantees invested in ringfenced call accounts in favour of third parties. The majority of the restricted cash invested pertains to contracted land payments where guarantees are required to be issued in favour of the seller prior to lodgement and registration of the land.

The carrying amount of restricted cash balances approximate their fair value.

13. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

Cash and cash equivalents consist of:
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Cash on hand Bank balances	1 6 1 6 336 532 476 526 331 255 471 740
	336 533 476 532 331 256 471 746

The carrying amount of cash and cash equivalents approximate their fair value. In line with the JSE Proactive Monitoring report, the Group has classified its restricted cash from cash and cash equivalents to disclose it separately. Refer to note 12.

37

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

14. SHARE CAPITAL

he year ended 28 February 2021 SHARE CAPITAL
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Authorised Ordinary shares	1 000 000 1 000 000 1 000 000 1 000 000
	Group Company
	Number of shares 2021 Number of shares 2020 Number of shares 2021 Number of shares 2020
Reconciliation of number of shares issued: Opening balance Treasury shares issued to settle long-term incentive scheme Issued shares converted to treasury shares on expiry of long-term incentive scheme	467 632 380 467 632 380 467 632 380 467 632 380 3 899 674 – 3 899 674 – (2 277 320) – (2 277 320) –
Closing balance	469 254 734 467 632 380 469 254 734 467 632 380
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Issued and fully paid Ordinary Treasury shares	670 206 664 354 670 206 664 354 (7 127) (11 376) (7 127) (11 376)
	663 079 652 978 663 079 652 978

The unissued shares are under the control of the Directors until the next annual general meeting. The shares have no par value.

38

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

15. DEVELOPMENT LOANS AND FACILITIES

he year ended 28 February 2021 DEVELOPMENT LOANS	AND FACILITIES
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Development loans General banking facility Investment loan facility	1 548 879 1 261 416 1 548 879 1 261 416 132 358 68 280 132 358 68 280 220 252 90 000 170 252 90 000
	1 901 489 1 419 696 1 851 489 1 419 696
2021 Development loans Average nominal interest rate % Maturity date Group R’000 Company R’000
Non-current Portimix Proprietary Limited 8.00 Between June 2022 and June 2025 108 536 108 536 Century Property Prime November 2027 117 069 117 069 Developments Proprietary Limited
225 605 225 605
Current Absa Bank Limited Prime less 0.25% Between March 2021 and February 2022 462 880 462 880 Nedbank Limited Prime Between March 2021 and February 2022 332 456 332 456 Investec Bank Limited Prime less 0.25% Between March 2021 and February 2022 390 055 390 055 Portimix Proprietary Limited 8.00 June 2021 87 447 87 447 Century Property Prime February 2022 29 669 29 669 Developments Proprietary Limited National Housing Finance Prime Between March 2021 and February 2022 20 767 20 767 Corporation Limited
1 323 274 1 323 274
1 548 879 1 548 879

39

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

15. DEVELOPMENT LOANS AND FACILITIES continued

2021
Investment loans and	Average nominal
general banking facilities	interest rate %	Maturity date	Group R’000	Company R’000
Current loans
Nedbank Limited	Prime	March 2021	132 358	132 358
Absa Bank Limited	Prime	March 2021	170 252	170 252
Absa Bank Limited	Prime less 1.7%	No fxed terms of repayment	50 000	–
			352 610	302 610
Total			1 901 489	1 851 489
2020
	Average nominal
Development loans	interest rate %	Maturity date	Group R’000	Company R’000
Non-current loans
Portimix Proprietary Limited	8.00	Between June 2021 and June 2025	252 639	252 639
Current loans
Absa Bank Limited	Prime	Between March 2020
		and February 2021	336 682	336 682
Nedbank Limited	Prime	Between March 2020
		and February 2021	168 145	168 145
Investec Bank Limited	Prim to prime	Between March 2020
	less 0.25%	and February 2021	427 364	427 364
Portimix Proprietary Limited	8.00	June 2020	76 586	76 586
			1 261 416	1 261 416
2020
Investment loans and	Average nominal
general banking facilities	interest rate %	Maturity date	Group R’000	Company R’000
Current loans
Nedbank Limited	Prime	March 2020	68 280	68 280
Absa Bank Limited	Prime	April 2020	90 000	90 000
			158 280	158 280
Total			1 419 696	1 419 696

Please refer to note 32 for the maturity groupings of the financial liabilities of the Group.

40

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

15. DEVELOPMENT LOANS AND FACILITIES continued

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Split between non-current and current portions Non-current liabilities Current liabilities	225 605 252 639 225 605 252 639 1 675 884 1 167 057 1 625 884 1 167 057
	1 901 489 1 419 696 1 851 489 1 419 696

Development loans include funding provided for top-structure funding as well as land and infrastructure loans. Top-structure funding payable to the financial institutions is secured by a pre-defined level of pre-sold apartments for which financial guarantees are in place. Land and infrastructure loans are secured by bonds registered over the land. Development loans are settled through the registration of the apartments that act as security.

The development loans payable to Portimix Proprietary Limited and Century Property Developments Proprietary Limited have long-term repayment terms with fixed maturity dates. The loans reflect the discounted contractual cash flows and have been discounted at the average lending rate of the Group at inception of the respective transactions.

Investment loan and general banking facilities pertain to short-term bridging loan facilities and are secured by completed apartments not yet registered.

The carrying amount of development loans and facilities approximate their fair value. Refer to note 8 for disclosure of the mortgage bonds acting as security for the loans. No breaches or funding or default on payments were incurred during the year.

16. LEASE LIABILITIES

The Company entered into a lease agreement for the rental of office space in the Western Cape region during the prior year. There were no previous leases entered into by the Company.

The current lease term is for a period of 36 months with the option to renew. Management’s best estimate at this point in time is that a renewal period of 24 months will be applicable. The average effective borrowing rate used in the lease is prime.

The maturity analysis of lease liabilities is as follows:

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Within one year Two to fve years	1 006 940 1 006 940 2 421 3 427 2 421 3 427
Less fnance charges component	3 427 4 367 3 427 4 367 (504) (823) (504) (823)
	2 923 3 544 2 923 3 544
Non-current liabilities Current liabilities	2 170 2 923 2 170 2 923 753 621 753 621
	2 923 3 544 2 923 3 544
Reconciliation of lease liabilities Opening balance Adoption of IFRS 16 Interest accrued Repayment of lease liabilities	3 544 – 3 544 – – 3 977 – 3 977 319 308 319 308 (940) (741) (940) (741)
Closing balance	2 923 3 544 2 923 3 544
Amount recognised in proft or loss Interest on lease liabilities Depreciation on right-of-use asset – offce building	319 308 319 308 795 663 795 663
	1 114 971 1 114 971

The Group has signed a new lease engagement for its head office which will commence on 1 March 2021. The estimated impact on the lease liabilities and right-of-use assets is R39 million.

41

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

17. DEFERRED TAXATION

he year ended 28 February 2021 DEFERRED TAXATION
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Deferred taxation asset/(liability) Deferred taxation on deferred revenue Deferred taxation on employee benefts Developments under construction allowance Donations not deductible Deferred taxation on available taxation losses Right-of-use assets and liabilities	10 9 – – 8 275 6 344 8 200 6 284 (169 000) (115 817) (169 000) (115 817) – 1 664 – 1 664 943 7 854 – 6 080 113 64 113 64
Total deferred taxation liability	(159 659) (99 882) (160 687) (101 725)
Reconciliation of deferred taxation liability At beginning of year Deferred taxation on deferred revenue Deferred taxation on employee benefts Developments under construction allowance Donations not deductible Deferred taxation on available taxation losses Right-of-use assets and liabilities	(99 882) 5 573 (101 725) 4 193 1 (1 416) – (1 425) 1 931 3 565 1 916 3 516 (53 183) (115 817) (53 183) (115 817) (1 664) 1 664 (1 664) 1 664 (6 911) 6 485 (6 080) 6 080 49 64 49 64
At the end of the year	(159 659) (99 882) (160 687) (101 725)

Deferred taxation has been calculated at the standard corporate taxation rate as at the reporting date as management expect to recover the carrying value of assets through use. Deferred taxation assets are raised after due consideration of future taxable income.

A deferred taxation asset has been recognised for Balwin Fibre Proprietary Limited as a result of their assessed loss positions. Balwin Fibre Proprietary Limited reported an assessed loss of R3.4 million (2020: R6.3 million).

The Company utilised its carried forward assessed loss of R21.7 million in full in the current year.

The Group has reviewed the latest sufficient forecast of Balwin Fibre Proprietary Limited and, based on this review, has concluded that they have probable future taxable income necessary to support the deferred taxation asset. The improved trading performance of Balwin Fibre Proprietary Limited is based on the increased homes connected as the development pipeline is rolled out.

42

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

18. TRADE AND OTHER PAYABLES

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Financial instruments: Trade payables Payroll accruals Other accruals Non-fnancial instruments: Payroll accruals Value added taxation payable	79 745 48 197 76 010 45 715 – 5 993 – 5 987 17 311 13 373 17 847 13 682 7 840 – 7 840 – – 43 690 – 43 690
	104 896 111 253 101 697 109 074

The Directors consider the carrying amounts of the trade and other payables to approximate their fair values due to the nature of the financial instrument.

19. EMPLOYEE BENEFITS

Reconciliation of employee benefits

Group	2021 2020
	Opening balance R’000 Additions R’000 Utilised during the year R’000 Closing balance R’000 Opening balance R’000 Additions R’000 Utilised during the year R’000 Closing balance R’000
Leave pay Bonus	5 153 11 698 (10 834) 6 017 5 012 10 106 (9 965) 5 153 16 822 36 001 (29 264) 23 559 4 975 27 643 (15 796) 16 822
	21 975 47 699 (40 098) 29 576 9 987 37 749 (25 761) 21 975
Company	2021 2020
	Opening balance R’000 Additions R’000 Utilised during the year R’000 Closing balance R’000 Opening balance R’000 Additions R’000 Utilised during the year R’000 Closing balance R’000
Leave pay Bonus	5 078 11 621 (10 834) 5 865 4 912 10 074 (9 908) 5 078 16 649 25 641 (18 869) 23 421 4 975 27 470 (15 796) 16 496
	21 727 37 262 (29 703) 29 286 9 887 37 544 (25 704) 21 727

The leave pay provision is based on the number of leave days due calculated at the employees cost to Company.

The bonus provision relates to a bonus payable to employees based on the approved short-term incentive scheme of the Group.

43

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

20. REVENUE

he year ended 28 February 2021 REVENUE
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Revenue from contracts with customers Revenue from sale of apartments Revenue from sale of land Bond commission Rental of electronic communication	2 659 330 2 842 856 2 659 330 2 842 856 – 45 000 – 45 000 15 892 10 993 15 892 10 993 21 819 12 430 – –
	2 697 041 2 911 279 2 675 222 2 898 849
Revenue other than from contracts with customers Donation income	3 533 3 174 – –
	2 700 574 2 914 453 2 675 222 2 898 849

Revenue is derived principally from the sale of apartments, recognised once the control has transferred to the buyer. Revenue is measured based on consideration specified in the agreement with the customer and excludes amounts collected on behalf of third parties. Revenue from the sale of apartments is recorded net of any sales incentives. There is no significant judgement applied in determining revenue from contracts with customers.

Revenue from the sale of apartments is disaggregated on a regional basis as well per each development brand. The disaggregation is shown below:

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Disclosure of disaggregated revenue from sale of apartments by region Johannesburg Tshwane Western Cape KwaZulu-Natal	1 326 323 1 399 024 1 326 323 1 399 024 281 926 309 708 281 926 309 708 749 735 871 730 749 735 871 730 301 346 262 394 301 346 262 394
	2 659 330 2 842 856 2 659 330 2 842 856
Disclosure of disaggregated revenue from sale of apartments by brand Classic Collection Green Collection Signature Collection	1 959 826 2 247 768 1 959 826 2 247 768 386 030 166 902 386 030 166 902 313 474 428 186 313 474 428 186
	2 659 330 2 842 856 2 659 330 2 842 856

44

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

21. SHARE-BASED PAYMENTS

Old Scheme

Pursuant to the listing of the Group in 2016, a loan was provided to certain interested investors for the subscription of shares. The interested investors comprised certain staff and contractors of the Group. The loan facility was provided to acquire shares in the listing. The aggregate loan facility amounted to R25 million and accrued interest bi-annually at a variable rate, equal to the official rate of interest published by SARS from time to time in respect of loans obtained by an employee from his or her employer.

The loan is secured by way of a pledge by the interested investors of the Balwin shares acquired and any proceeds received from the sale of the pledged shares.

The loan was granted for a term of five years from date of listing, however, early settlement of the loan is allowed as follows:

• up to 50% of the outstanding balance of the loan may be settled between years three and four; and

• up to 75% of the outstanding balance of the loan may be settled after the fourth anniversary of the loan.

Should the investor settle or partially settle the loan before the repayment date, an early repayment fee shall become repayable to the Group. The early settlement fee is calculated as the market value of the pledged shares at the time of repayment less the sum of the outstanding balance.

Upon the repayment date of the loan:

• the investor is required to settle the outstanding loan amount (calculated as the sum of the initial loan amount, plus interest accrued and less dividends received the investor has elected to apply against the outstanding loan balance) in cash prior to the release by the Group of the pledge over the shares; or

• the investor may request that the Group sell such number of pledged shares required to settle the outstanding balance in order to secure the release of the pledge of the remaining unsold Balwin shares under the following conditions;

• if the value of the Balwin shares sold exceeds the outstanding balance, the excess proceeds will be paid by the Group to the interested investor; or

• if the value of the Balwin shares sold is less than the outstanding balance, the Group will have no further claim against the interested investors in respect of the shortfall.

The full scheme expired in the current year and all shares were forfeited by the interested investors as reconciled below:

Share options	2021	2020
Opening balance	2 277 320	2 277 320
Shares awarded during the year	–	–
Shares forfeited during the year	(2 277 320)	–
Shares exercised during the year	–	–
Closing balance	–	2 277 320

Information on options granted during 2016

Fair value was determined by the Black-Scholes model. The following inputs were used:

• Weighted average share price of R13.86;

• Exercise price of R9.88;

• Expected volatility of 23%;

• Vesting period of five years; and

• The risk-free interest rate of 8.62%.

Method and the assumptions incorporated:

• The 23% expected volatility takes into account the past trading as well as an expectation of future trading. The 23% is representative of a fair value for pricing the option, with no profit taken into account. Shorter term volatility is typically used; and

• No other features of the option grant were incorporated into the measurement of fair value.

45

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

21. SHARE-BASED PAYMENTS continued

New Scheme

As a substitute for the old share scheme, Balwin introduced a new share option scheme for executive and management of the Group. In terms of the rules of Balwin’s Conditional Share Plan (“the Share Plan”), as approved by the shareholders at the annual general meeting, allowance is made for the offer of rights in the form of bonus shares, performance shares and/or retention shares under the following allocation conditions:

Bonus shares – Bonus shares are awarded annually, to the extent that an short-term incentive (“STI”) was payable, at a ratio of a 1:1 match to the actual STI paid in terms of the immediately preceding financial year. The bonus shares are linked to short-term incentive performance and, as such, no prospective performance conditions are applicable. These awards are subject to continued employment over the three-year vesting period only.

Performance shares – Performance shares are awarded subject to the discretion of the Remuneration Committee and specific performance conditions will be attached to the award. Any performance condition attached to performance shares shall be objective and representative of a fair measure of performance.

Retention shares – Retention shares are only awarded in special circumstances with the aim to attract and retain specific and sought after talent, subject to the discretion of the Remuneration and Nomination Committee. These shares are subject to continued employment only.

In the current financial year, bonus shares were allocated to senior management personnel as based on the STI of the participating employees priced at the 30-day volume weighted average share price.

Total expenses of R7.0 million (2020: R9.9 million) related to share-based payments transactions that were recognised in the period. The following equity-settled share-based payment arrangements relating to the bonus share scheme, which is the only active scheme in existence during the current year:

Total expenses of R7.0 million (2020: R9.9 million) The following equity-settled share-based payment in existence during the current year:	related to share-based payments transactions that were recognised in the period. arrangements relating to the bonus share scheme, which is the only active scheme
Share options	Number of shares Award date Vesting date Fair value at award date
Bonus shares – 2017 Bonus shares – 2018 Bonus shares – 2019 Bonus shares – 2020	4 042 483 26 February 2019 30 June 2020 R2.54 639 414 26 February 2019 30 June 2021 R2.54 2 505 401 31 July 2019 30 June 2022 R2.70 3 089 145 31 July 2020 30 June 2023 R2.60 10 276 443 Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Reconciliation of share options outstanding: Opening balance Shares awarded during the year Shares forfeited during the year Shares exercised during the year	7 187 298 4 681 897 7 187 298 4 681 897 3 089 145 2 505 401 3 089 145 2 505 401 (187 755) – (187 755) – (3 974 781) – (3 974 781) –
Closing balance	6 113 907 7 187 298 6 113 907 7 187 298
Reconciliation of share-based payment reserve: Opening balance Shares awarded during the year Shares forfeited during the year Shares exercised during the year	9 900 9 900 7 515 9 900 7 515 9 900 (536) – (536) – (10 101) – (10 101) –
Closing balance	6 778 9 900 6 778 9 900

* denotes a value of less than R1 000.

46

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

22. OTHER INCOME

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Rental income Municipal recoveries Proft on exchange differences Proft on sale of property, plant and equipment Net revenue share from Smart PV Proprietary Limited other income	2 595 16 198 2 595 16 198 184 238 184 238 338 – 338 – 347 907 347 907 1 185 1 430 1 185 1 430 2 003 1 074 144 –
	6 652 19 847 4 793 18 773

23. OPERATING PROFIT

Operating profit for the year is stated after charging the following, amongst others:

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Expenses by nature Employee costs Depreciation and amortisation Consulting fees Legal fees Auditor’s remuneration – external Audit fees Non-audit services	107 291 99 883 103 802 97 114 14 924 12 097 8 882 8 567 14 282 8 231 14 273 8 231 1 264 1 280 1 251 1 273 1 258 1 094 1 234 1 044 30 – 30 –
	1 288 1 094 1 264 1 044
Auditor’s remuneration – internal	691 676 691 676

24. INVESTMENT INCOME

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Bank Occupational interest Other investment income	8 990 11 362 8 927 11 219 4 951 – 4 951 – 2 995 2 311 2 995 2 311
	16 936 13 673 16 873 13 530

25. FINANCE COSTS

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Development loans Lease liability interest Bank Tax authorities Other Capitalised interest on developments under construction	72 208 77 326 72 208 77 326 319 308 319 308 10 660 6 086 9 090 6 086 3 055 6 242 3 055 6 242 45 7 45 7 (72 208) (77 326) (72 208) (77 326)
Total fnance costs	14 079 12 643 12 509 12 643

47

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

26. TAXATION

Major components of the taxation expense

Major components of the taxation expense
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Current Current taxation – current year Current taxation – prior year	70 909 – 70 909 – – 58 521 – 58 521
	70 909 58 521 70 909 58 521
Deferred Deferred taxation – current year Arising from prior period adjustments	59 777 162 696 58 962 163 159 – (57 241) – (57 241)
	59 777 105 455 58 962 105 918
	130 686 163 976 129 871 164 439

Reconciliation of the taxation

Reconciliation between applicable tax rate and average effective tax rate.

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Applicable tax rate Disallowable charges Non-taxable income* Prior period adjustments	28.00% 28.00% 28.00% 28.00% 0.03% 0.28% 0.19% 0.25% (0.10)% –% (0.10)% –% –% 0.22% –% 0.22%
	27.93% 28.50% 28.09% 28.47%

* Disallowable charges include non-deductible expenses in the form of donations, interest charged by SARS, penalties and fines.

** Non-taxable income include dividends received and profits from associates.

Balwin entered into a voluntary disclosure programme (VDP) with the South African Revenue Services (SARS) during the prior financial year in light of the Milnerton Estates Limited v C:SARS (1159/2017) [2018] ZASCA 155 (20 November 2018) case law. The case law states when a contract becomes unconditional at which point the tax payer is required to pay tax on such accrued income. The VDP process was concluded and Balwin paid over all monies to SARS during the prior financial year.

48

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

27. CASH (USED IN) GENERATED FROM OPERATIONS

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Proft before taxation Adjustments for: Depreciation and amortisation Proft on sale of property, plant and equipment Proft on foreign exchange Interest income Finance costs Share of proft of associate Movements in employee benefts Leases Share-based payment Movement in foreign exchange translation reserve Changes in working capital: Increase in developments under construction (Increase)/decrease in trade and other receivables Increase in restricted cash Increase in development loans receivable Decrease in trade and other payables	467 051 575 336 461 570 577 654 17 224 12 097 11 182 8 567 (347) (907) (347) (907) (338) – (338) – (16 936) (13 673) (16 873) (13 530) 14 079 12 643 12 509 12 643 (1 744) (322) (1 744) (322) 7 601 11 988 7 559 11 840 – 3 544 – 3 544 6 979 9 900 6 979 9 900 – 36 – – (724 596) (244 438) (724 596) (244 438) (97 826) 316 979 (94 313) 318 706 (31 390) – (31 390) – (34 103) (30 628) (34 103) (30 628) (6 357) (71 153) (7 377) (70 656)
	(400 703) 581 402 (411 282) 582 373

28. TAXATION PAID

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Balance at beginning of the year Current taxation relating to current year Current taxation relating to prior year Balance at end of the year	15 812 (30 181) 15 812 (30 181) (70 909) – (70 909) – – (58 521) – (58 521) (5 865) (15 812) (5 865) (15 812)
	(60 962) (104 514) (60 962) (104 514)

49

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

29. RELATED PARTIES

Relationships Subsidiaries Refer to note 5 Associates Refer to note 6 Members of key management Refer to the director’s report for a list of Directors and prescribed officer

Balwin Properties Limited, in the ordinary course of business, entered into various sales transactions with its key management personnel. The effect of these transactions is included in the financial performance and results of the Group. Terms and conditions of these transactions are determined on an arm’s-length basis and are approved by the Board.

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Related party balances Loan accounts owing by related parties Subsidiaries Balwin Fibre Proprietary Limited* *Associate Balwin Rentals Proprietary Limited* Amounts receivable from related party Company Legaro Property Development Proprietary Limited Related party transactions Sale of apartments and land to related parties Directors and companies Lucille Properties Proprietary Limited Shelby Prop Investments Proprietary Limited Legaro Property Development Proprietary Limited Associate Balwin Rentals Proprietary Limited Property rental management fee received Directors and prescribed officers RN Gray J Weltman U Gschnaidtner SV Brookes Rental paid to related parties Directors, prescribed officers and companies Volker Properties Proprietary Limited Lucille Properties Proprietary Limited SV Brookes RN Gray Shelby Prop Investments Proprietary Limited U Gschnaidtner J Weltman Donations paid to related party Subsidiary Balwin Foundation NPC Compensation to Directors and other key management* Short-term employee benefits Post-employment benefits Share-based payment	– – 10 306 48 556 14 112 14 112 14 112 14 112 22 366 46 575 22 366 46 575 18 298 – 18 298 – 6 516 – 6 516 – – 45 000 – 45 000 – 49 686 – 49 686 225 245 225 245 8 9 8 9 25 33 25 33 412 447 412 447 485 – 485 – 12 – 12 – 1 290 867 1 290 867 234 106 234 106 338 – 338 – – 20 – 20 49 – 49 – – – 5 092 5 942 34 574 33 799 34 574 33 799 1 113 888 1 113 888 4 791 7 113 4 791 7 113
	40 478 41 800 40 478 41 800

• The entity is controlled by SV Brookes

• ** The entity is controlled by RN Gray

*** Spouse of SV Brookes has significant influence over the entity and is a member of the key management. The balance receivable earns interest at prime and is repayable by 31 December 2022.

• **** The loan is unsecured, interest free and has no fixed terms of repayment. Refer note 9 for detail.

* The loan has no fixed repayment terms. Refer to note 9 for detail.

50

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

30. DIRECTORS’ AND PRESCRIBED OFFICER’S EMOLUMENTS

Executive	2021
	Basic salary R’000 Bonus R’000 Medical aid R’000 Provident fund R’000 Travel allowance R’000 Long-term incentive expense R’000 Total R’000*
SV Brookes J Weltman	5 525 3 270 191 334 120 1 741 11 181
	3 613 1 451 191 221 120 709 6 305
	9 138 4 721 382 555 240 2 450 17 486

Executive	2020
	Basic salary R’000 Bonus R’000 Medical aid R’000 Provident fund R’000 Long-term incentive expense* R’000 Total R’000
SV Brookes J Weltman	5 326 1 857 175 266 2 657 10 281 3 539 3 841 177 177 971 8 705
	8 865 5 698 352 443 3 628 18 986

* The long-term incentive expense reflects the cost that has been expensed by the Company

Non-executive

All emoluments disclosed below relates to their remuneration derived for services performed in their capacity as Non-Executive Directors. No bonuses or any contributions were paid to Non-Executive Directors.

2021	2020
R’000	R’000
H Saven 897	884
K Mzondeki 522	507
R Zekry 449	499
A Shapiro 631	613
O Amosun 475	461
T Mkgosi-Mwantembe 452	342
J Scher 318	154
D Westcott 353	171
4 097	3 631

Prescribed officer

Prescribed officer
		Bonus and				Long-term
	Basic	variable	Medical	Provident	Travel	incentive
	salary	remuneration^	aid	fund	allowance	expense*	Total
2021	R’000	R’000	R’000	R’000	R’000	R’000	R’000
U Gschnaidtner RN Gray	4 396 4 808	7 841 2 496	104 208	267 291	120 120	1 066 1 275	13 794 9 198
	9 204	10 337	312	558	240	2 341	22 992
			Bonus and			Long-term
		Basic	variable	Medical	Provident	incentive
		salary remuneration^		aid	fund	expense	Total
2020		R’000	R’000	R’000	R’000	R’000	R’000
U Gschnaidtner		4 260	8 270	95	213	1 622	14 460
RN Gray		4 649	1 420	190	232	1 863	8 354
		8 909	9 690	285	445	3 485	22 814

• ^ The variable remuneration is based upon the employment contract.

• The long-term incentive expense reflects the cost that has been expensed by the Company

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 51

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

30. DIRECTORS’ AND PRESCRIBED OFFICER’S EMOLUMENTS continued

Directors’ interest

The following shares are owned by Directors and prescribed officers:

	2021 2020
	Number of shares % holding Number of shares % holding
SV Brookes RN Gray U Gschnaidtner R Zekry J Weltman* O Amosun	170 374 031 36.0% 167 635 659 35.5% 47 678 208 10.1% 47 221 798 10.0% 10 150 788 2.2% 10 150 788 2.2% 3 633 269 0.8% 3 633 269 0.8% 233 142 0.1% 1 012 145 0.2% 9 390 –% 9 390 –%
	232 078 828 49.2% 229 663 049 48.7%

* These shares were issued under the old share scheme. The shares have not as yet vested. Refer to Note 21. There has been no movement in Directors interest from year end to date of approval of the financial statements.

Director’s share options

Bonus shares were awarded to the Directors and prescribed officer in terms of the Group’s Conditional Share Plan, refer to Note 21. These awards are linked to short-term incentive performance and have no prospective performance conditions or strike prices attached. These awards are subject to continued employment only.

The following share options were awarded to Directors but not yet vested at year end:

	Opening	Granted during	Settled/lapsed
2021	balance	the year	during the year	Closing balance
SV Brookes	1 835 511	–	–	1 835 511
RN Gray	1 313 600	–	–	1 313 600
J Weltman	706 782	–	–	706 782
U Gschnaidtner	1 126 285	–	–	1 126 285
	4 982 178	–	–	4 982 178
	Opening	Granted during	Settled/lapsed
2020	balance	the year	during the year	Closing balance
SV Brookes	1 220 156	615 355	–	1 835 511
RN Gray	845 204	468 396	–	1 313 600
J Weltman	431 745	275 037	–	706 782
U Gschnaidtner	742 996	383 289	–	1 126 285
	3 240 101	1 742 077	–	4 982 178

31. MAJOR SHAREHOLDERS

Registered shareholders owning more than 5% of issued shares:

	2021 2020
	Number of shares held Percentage of issued shares Number of shares held Percentage of issued shares
Volker Holdings Proprietary Limited Rodna Investments Proprietary Limited* Buff-Shares Proprietary Limited GRE Africa Limited Pershing Klipfontein Heights Proprietary Limited Non-public shareholders Public shareholders	170 374 031 36.1% 167 635 659 35.5% 47 678 208 10.1% 47 221 798 10.0% – –% 43 597 577 9.2% 36 418 425 7.7% – –% 32 618 871 6.9% – –% 23 929 009 5.1% – –% 235 316 799 49.8% 235 037 829 49.8% 236 875 793 50.2% 237 154 763 50.2%

As at 28 February 2021 there were 9 561 (2020: 3 246) public shareholders.

* The entity is controlled by SV Brookes.

** The entity is controlled by RN Gray.

52

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

32. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Categories of financial instruments

Categories of financial instruments
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Categories of financial assets Financial assets at amortised cost Development loans receivable Loans to related parties Loans to external parties Trade and other receivables Restricted cash Cash and cash equivalents	68 181 34 078 68 181 34 078 14 112 14 112 24 418 62 668 11 658 – 11 658 – 682 035 597 052 674 164 591 599 31 390 – 31 390 – 336 533 476 532 331 256 471 746
	1 143 909 1 121 774 1 141 067 1 160 091
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Categories of financial liabilities Financial liabilities at amortised cost Development loans and facilities Trade and other payables	(1 901 489) (1 419 696) (1 851 489) (1 419 696) (97 056) (67 563) (93 857) (65 384)
	(1 998 545) (1 487 259) (1 945 346) (1 485 080)

The Directors consider the carrying value of the financial assets and liabilities listed above to approximate its fair value.

Capital risk management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The maximum gearing ratio has been set at 50% (2020: 50%) by the Directors. Developments under construction is financed on a phaseby-phase basis. Development finance is obtained through secured pre-sales and is repaid on registration of the phase being financed.

The capital structure of the Group consists of debt, which includes the development finance disclosed in Note 15, cash and cash equivalents disclosed in note 13, and equity as disclosed in the statement of financial position. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio.

53

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

32. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued

Financial risk management

Overview

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or a counterparty to a financial instrument fails to meet its contractual obligations. Given the nature of the operations of the Group, credit risk on the sale of apartments not yet registered is mitigated through the fact that the financial guarantees are in place in full prior to the handover of the apartment. As such, credit risk arises principally from the Group’s receivables from loans, amounts due from body corporates and transferring attorneys, municipal debtors, development loans due from financial institutions and cash and cash equivalents.

Credit risk is managed on a Group basis.

Development loans receivables

Development loans represents over settlement of the development loan facility by the transferring attorney to the financial institution. The loans are expected to be recovered from the respective financial institution within 12 months after year end and have been classified as current. The Group considers the development loans receivable to be subject to a minimal exposure to credit risk due to funding on the development loans facilities being acquired from major banks and financial institutions with high quality credit standing.

Loans to related parties

Loans to related parties are actively reviewed and managed on a monthly basis through the review of forecasts and cash flow, to assess the recoverability of loans to related parties.

Furthermore, the Group monitors changes in credit risk by tracking the financial statements of the related party and assessing liquidity and solvency of the respective entity. In certain instances, loans to related parties are subordinated until such time as the Company’s assets fairly valued exceed its liabilities fairly valued.

Loans to external parties

Loans to external parties comprise of enterprise development loans made to external parties. The Group monitors changes in credit risk by inspecting the financial results of the external parties after each six-month period. Where results indicate that the liquidity and solvency position of the external party has deteriorated since the previous six-month period, the Group considers credit risk to have significantly increased and recognises lifetime expected credit losses.

Trade and other receivables

Trade and other receivables relates to sales where registration has not yet transferred, however, revenue has been recognised as the apartment has been handed over to the purchaser and financial guarantees are in place for the full purchase price. Amounts owing by the transfer attorneys relates to cash received from registrations which has not yet been transferred to the Group. Due to the nature of the trade and other receivables the credit risk is limited.

The Group uses the simplified approach and recognises lifetime expected credit losses on its trade and other receivables.

54

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

32. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued

Cash and cash equivalents

Cash and cash equivalents are held with major banks and financial institutions which are rated AA+ based on the Fitch ratings. The Group considers cash and cash equivalents to be subject to a limited exposure to credit risk.

There has been no write-off of any financial assets in the current year (2020: Rnil) other than the expected credit loss allowance raised.

The maximum exposure to credit risk is presented in the table below:

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Financial instrument Development loans receivable Loans to related parties Loans to external parties Trade and other receivables Cash and cash equivalents	68 181 34 078 68 181 34 078 14 112 14 112 24 418 62 668 11 658 – 11 658 – 682 035 597 052 674 164 591 599 336 533 476 532 331 256 471 746
	1 112 519 1 121 774 1 109 677 1 160 091

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
The movement in the expected credit loss allowance: Balance at the beginning of the year Lifetime loss allowance recognised in the current year (Trade and other receivables)	(955) – (955) – (3 406) (955) (3 401) (955)
Balance at the end of the year	(4 361) (955) (4 356) (955)

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions.

The Group’s risk to liquidity is a result of the funds available to cover future commitments. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities.

Development finance is obtained from major financial institutions based on secured pre-sales of residential apartment on a phaseby-phase basis. Development finance is repaid upon registration of a specific phase being financed. The phase-by-phase approach to funding reduces the risk of accumulating excessive debt which impacts liquidity. The business operates within pre-defined risk tolerance levels set at a 50% debt to equity ratio.

The table below analyses the Group’s financial liabilities into relevant maturity Groupings based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances and as such the impact of discounting is not significant.

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 55

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

32. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued

	Less than					Carrying
	1 year	1 to 2 years	2 to 5 years	Over 5 years	Total	amount
	R‘000	R‘000	R‘000	R‘000	R‘000	R‘000
Group – 2021 Trade and other payables Development loans Lease liabilities Facilities	97 056 1 560 073 1 006 352 610	– 30 855 2 421 –	– 262 174 – –	– 73 637 – –	97 056 1 926 739 3 427 352 610	97 056 1 323 274 2 923 352 610
	2 010 745	33 276	262 174	73 637	2 379 832	1 775 863
Group – 2020
Trade and other payables	67 563	–	–	–	67 563	67 563
Development loans	1 167 056	127 449	155 945	60 512	1 510 962	1 261 416
Lease liabilities	940	3 427	–	–	4 367	3 544
Facilities	158 280	–	–	–	158 280	158 280
	1 393 839	130 876	155 945	60 512	1 741 172	1 490 803
Company – 2021 Trade and other payables Development loans Facilities	93 857 1 560 073 302 610	– 30 855 –	– 262 174 –	– 73 637 –	93 857 1 926 739 302 610	93 857 1 323 274 302 610
	1 956 540	30 855	262 174	73 637	2 323 206	1 719 741
Company – 2020
Trade and other payables	65 384	–	–	–	65 384	65 384
Development loans	1 167 056	127 449	155 945	60 512	1 510 962	1 167 057
Facilities	158 280	–	–	–	158 280	158 280
	1 390 720	127 449	155 945	60 512	1 734 626	1 390 721

56

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

32. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT continued

Foreign currency risk

Foreign currency risk arises from fluctuations in foreign currencies for imported products.

The Group’s exposure to foreign exchange risk is limited due to the fact that no operations have taken place in the foreign subsidiary in the current or prior periods. The foreign subsidiary was liquidated in the prior year.

The Group does not hedge foreign exchange fluctuations.

Interest rate risk

The Group’s interest rate risk arises from long- and short-term borrowings, cash and cash equivalents, restricted cash and development loans receivable. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions and alternative financing. Based on these scenarios, the Group calculates the impact on profit or loss of a defined interest rate movement. Interest rate risk is higher for land debt than development finance. Development finance funding is short-term in nature and therefore there is no significant exposure to variations in interest rates.

The scenarios are run only for financial instruments that represent the major interest-bearing positions. Based on the simulations performed, the impact on post-tax profit of a 1% movement would be a maximum increase and opposite decrease of R14.5 million (2020: R9.0 million) for the Group and R14.0 million (2020: R8.5 million) for the Company. The sensitivity analysis is prepared using a sensitivity rate which is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

Interest rate sensitivity analysis

Interest rate sensitivity analysis
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Interest-bearing instrument comprise: Loans to related parties Development loans receivable Cash and cash equivalents Development loans payable Restricted cash	14 112 14 112 24 572 62 668 68 181 34 078 68 181 34 078 336 533 468 941 331 256 464 155 (1 901 489) (1 419 696) (1 851 489) (1 419 696) 31 390 7 591 31 390 7 591
	(1 451 273) (894 974) (1 396 090) (851 204)
Interest rate sensitivity Loans to related parties Development loans receivable Cash and cash equivalents Development loans payable Restricted cash	141 141 246 627 682 341 682 341 3 365 4 689 3 313 4 642 (19 015) (14 197) (18 515) (14 197) 314 76 314 76
	(14 513) (8 950) (13 960) (8 511)

BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021 57

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

33. BASIC, HEADLINE AND DILUTED EARNINGS PER SHARE

he year ended 28 February 2021 BASIC, HEADLINE AND	DILUTED EARNINGS PER SHARE
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Basic (cents) Headline (cents) Diluted earnings (cents) Diluted headline earnings (cents) Tangible net asset value per share (cents) Net asset value per share (cents) Weighted average shares in issue Net asset value (R’000) Reconciliation of profit for the year to headline earnings (R’000)* Profit for the year attributable to equity holders Profit on disposal of property, plant and equipment Fair value adjustment on investment property held by associate	71.67 88.02 71.47 87.83 71.19 87.17 70.99 86.98 679.57 631.13 679.24 631.64 682.83 631.13 682.33 631.64 469 023 886 467 632 380 469 023 886 467 632 380 3 202 620 2 951 390 3 200 307 2 953 743 336 156 411 610 – – (347) (907) – – (617) – – –
Headline earnings	335 192 410 703 – –
Weighted average number of shares Weighted average number of shares in issue Potential dilutive impact of share options	469 023 886 467 632 380 469 023 886 467 632 380 3 168 706 4 560 213 3 168 706 4 560 213
Weighted average diluted shares in issue	472 192 592 472 192 593 472 192 592 472 192 593

* Calculated as total assets less intangible assets divided by the weighted average shares in issue.

** Calculated as the net asset value divided by the weighted average shares in issue.

34. DIVIDENDS PER SHARE

	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Shares in issue Dividend declared (R) Dividends per share (cents)	469 254 734 467 632 380 469 254 734 467 632 380 92 549 748 123 761 678 92 549 748 123 761 678 19.72 26.47 19.72 26.47

35. FAIR VALUE INFORMATION

Fair value hierarchy

The table below analyses assets and liabilities carried at fair value. The different levels are defined as follows:

Level 1: Quoted unadjusted prices in active markets for identical assets or liabilities that the Group can access at measurement date.

Level 2: Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

No changes have been made to the valuation techniques.

The fair values of financial instruments that are not traded in an active market are determined using standard valuation techniques. These valuation techniques maximise the use of observable market data where available and rely as little as possible on Group specific estimates. The Group does not hold any financial assets or financial liabilities that are classified as level 2 or level 3. There were no transfers between Levels 1, 2 and 3 during the year.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021

ANNUAL FINANCIAL STATEMENTS

Notes to the Annual Financial Statements continued

For the year ended 28 February 2021

36. SEGMENTAL REPORTING

The operating segments within the Group have been identified based on the nature of their operations. Accordingly, the following segments have been identified:

Nature of operations

• Residential property developer sales to market

• Supplier of electronic communication services

Giving consideration to the quantitative thresholds of operating segments based on the nature of operations, it is not considered useful to the users of the annual financial statements to separately disclose the above identified segments.

37. CONTINGENT LIABILITIES

The Group had no contingent liabilities at 28 February 2021 (2020: RNil).

38. COMMITMENTS

Authorised capital expenditure

Already contracted for but not provided for

Authorised capital expenditure Already contracted for but not provided for
	Group Company
	2021 R‘000 2020 R‘000 2021 R‘000 2020 R‘000
Land (Unconditional) Land (Conditional)	370 138 169 661 370 138 169 611 340 129 273 127 330 129 273 127

This committed expenditure relates to land purchased for development and will be financed by available retained profits, mortgage facilities, existing cash resources and funds internally generated.

39. EVENTS AFTER THE REPORTING PERIOD

The Directors are not aware of any material event which occurred after the reporting date and up to the date of this report.

40. GOING CONCERN

The Directors have reviewed the Group and Company’s cash flow forecasts up to the period ending May 2022 and, in light of this review and the current financial position, the Directors believe that the Group and Company has adequate financial resources to continue in operation for the foreseeable future. Accordingly, the consolidated and separate annual financial statements have been prepared on a going concern basis.

The Group has performed cash flow forecasting to support the going concern assumption of the Group. In preparing the cash flow forecast, the terms of the existing debt covenants have been reviewed and are expected to be complied with in full.

The cash flow forecast is based upon the development programme of the business as approved by the executives. The development programme guides the potential for cash inflows from the sale and registration of apartments and drives the construction related costs incurred in order to deliver the apartments to the market. It is this relationship between the rate of construction and the rate of sales that is paramount to the success of the business model and the ability of the Group to effectively manage its cash resources. Accordingly, the cash flow forecasting of the Group is dynamic and is actively managed to ensure optimum cash management.

Consideration has been applied to the ongoing implications of the Covid-19 pandemic on the operations and financial performance on the Group in assessing the appropriateness of the going concern assumption. The Group has successfully navigated the challenging macro-economic conditions since the commencement of the pandemic. No material impact has been noted on the supply chain to the business and the effects of the pandemic have been appropriately managed on site to avoid any disruption to development beyond the national lockdown period. Largely supported by the decrease in interest rates, the Group has benefited from strong sales in the year which has resulted in 2 499 apartments being forward sold into future financial years.

The time frames at the deeds office and the supporting council offices have steadily improved over the year enabling the Group to successfully realise cash through registrations.

The Directors have satisfied themselves that the Group and Company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The Directors are not aware of any new material changes that may adversely impact the Group and Company.

The Directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the Group and Company.

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BALWIN PROPERTIES AUDITED CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS 2021