Given ongoing uncertainty around the future impact of Covid-19 on the economy and JSE-listed Octodec’s future financial performance, the company expects that its distributable earnings for the financial year ending August 31 will be at least 15% lower year-on-year.
The company reported distributable earnings per share (DPS) of 200.9c in the financial year ended August 31, 2019.
The board plans to reconsider its current distribution policy, which is to pay out 100% of distributable earnings.
The company will take its commitment to cash preservation and balance sheet management into consideration before it announces a final decision in November.
Octodec currently has R400-million of available cash and committed undrawn debt facilities and continues to reduce capital expenditure on upgrades, except for necessary capital expenditure projects.
The company continues to do extensive forecasting, sensitivity analysis and modelling of cash flow and balance sheet metrics regularly, including stress testing under different potential scenarios arising from Covid-19.
However, the board is satisfied with Octodec’s current levels of solvency and liquidity.
Encouragingly, Octodec reports that its July collections have shown similar trends compared with June, which was at 91%. The total collections rates for April and May were 66% and 74%, respectively.
To date, the company has granted almost R90-million worth of rental relief from March to July 24, with the vast majority granted to the commercial property segment.
Octodec says the rental relief was granted on a case-by-case basis, based on a long-term view, considering factors including the tenant’s business sustainability as well as retention and vacancy levels.
The majority of commercial tenants were afforded discounts rather than deferments or payment plans, especially small and medium enterprises, which continued to be most affected by Covid-19.
The company expects a longer recovery time in collections from tenants from places of worship, education and hotel facilities. These sectors represent 4% of Octodec’s total rental income.
Government office tenants, which make up 8% of the company’s total rental income, have continued to meet their obligations, while the residential portfolio remains resilient with relief measures only provided under exceptional circumstances and mostly in the form of payment plans.