Johannesburg – Sea Kay Holdings [JSE:SKY], the R5.3bn low cost housing developer, said it was confident it would receive payment for government contracts and would continue to target state-driven opportunities, including those in the low to middle cost housing segment.
In November 2009, former CEO Gerrie Holtzhausen told Fin24.com Sea Kay was edging towards liquidation due to outstanding goverment payments to the value of over R200m.
However, newly-appointed CEO Aaref Osman said on Tuesday steps had been applied to make good on the accounts. He also, intriguingly, referred to possible management changes in the group, saying "feathers would be ruffled" but without providing details.
"I think everyone understands that our lesson has been learnt," he said, adding the group has made "tremendous" progress in resolving disputes in the region of R100m over the N2 Gateway project in Cape Town.
A similar issue with the Gauteng department is taking longer, Osman said, but processes have now been put in place for the progressive payment of claims.
He said the group has started to position itself to build houses for the under R500 000 "gap market", in an attempt to be less dependent on government.
The group stressed that it will continue to partner with government to deliver fully subsidised housing.
"We will increase our capacity to move into other areas," said Osman. "In any business, dependency on one client is not ideal and part of our strategy going forward will be diversification."
The gap market is currently defined as households earning between R3 501 to R18 000 per month.
These consumers typically earn too much to qualify for RDP houses, but too little to raise home loans. It is estimated there are between 600 000 and 800 000 of these households.
According to Osman, access to finance will only be possible for households earning incomes at the upper end of the gap market.
Demand still hit by recession blues
"At the lower end some form of affordable rental housing will have to be made available," he said.
Osman, a former senior official in the department of housing (now department of human settlements), said however that the gap market's housing demand has not yet recovered from the recession.
Unemployment, high levels of household debt, the effect of the National Credit Act, the absence of an affordable product, financial institutions' aversion to perceived risk and the absence of alternative financial products is holding this group back from the housing market, he said.
"There's huge opportunity there, but the time is not right."
In the meantime, the group still sees opportunities of partnering with government to provide housing for the poor. "The government budget for human settlements is around R16bn," said Osman.
According to Osman, the construction group is also looking into building schools, clinics and multi-purpose community centres.
Sea Kay can deliver between 10 000 to 12 000 houses per year, and has received awards for the quality of its work.
The group is expecting a loss of between 17 cents and 18 cents per share for the year to end-June 2010.