The Sixth of October Development and Investment Company (SODIC) has postponed the launch of EGP 2bn worth projects originally scheduled for March 2020.
The postponement comes on the back of the cancellation of marketing events, including the Cityscape Egypt.
The ongoing global coronavirus (COVID-19) pandemic has given rise to affordability issues, which SODIC is addressing by tackling unit sizes and payment periods. However, the company is not extending payment plans to customers.
The company has seen a spike in the sales cancellation rate, from 12.0% in the first quarter (1Q) of 2019, to 22.0% in 1Q 2020. The rate dropped back down to 13.0% in the period between 1 April and 6 June 2020.
SODIC also reports positive signs of a recovery in delinquency rates, which had grown from 7.0% in 1Q 2019 to 11.0% in 1Q 2020.
Demand has continued support from favourable demographics and an investment environment where real estate is used as a store of wealth. There is also an accentuated value proposition of gated communities due to the current health crisis.
The company reported EGP 7.7bn of liquidity sources, of which EGP 2.7bn is in cash and equivalents, excluding EGP 1.2bn in maintenance deposits. SODIC also reported EGP 3.8bn in short-term receivables, and EGP 1bn in unutilised bank debt.
CAPEX was up 15.0% year-on-year (y-o-y) to EGP 950m in 1Q 2020, however, construction slowed down starting in April 2020.
This compares to the company’s lower payment obligations of EGP 624.8m in fiscal year (FY) 2019/20. This was comprised of EGP 394m in debt payments and EGP230.8m in land payments.
The EGP 7.7bn in liquidity sources covers the company for about 16 months. This assumes there are no new sales, no reduction in expenses, no postponement of CAPEX, and no restructuring of debt.
If a portion of the cheques currently in the company’s possession are securitised, they will bring in an additional EGP 1bn in liquidity. This in turn will ensure the monthly cash burn is reduced by 15%, through cutting down on G&A expenses, restructuring of the existing bank facilities, and postponing CAPEX. The securitisation of these cheques will also ensure SODIC will have 21 months of liquidity source cover rather than 16 months.