Italtile results show consistency

SOUTH AFRICA – Italtile’s results for the six months ended December 2015 show headline earnings per share up 22% to 43.4 cents, trading profit up 16% to R531m and system-wide turnover up 13% to R3.08bn.

The dividend is up 17% to 14.0 cents per share.

According to CEO Nick Booth the performance reported by the group for the six months ended December 31 2015 is primarily attributable to management’s commitment to instilling retail excellence across the key customer-facing components of the offering.

This resulted in improved levels of customer satisfaction and increased sales for the period.

The group also made strategic investments in its principal local suppliers, Ceramic Industries and Ezeetile, which delivered pleasing returns and continued to support the business’s growth agenda, according to Booth.

“The trading environment in the six months remained consistent with recent years, featuring moderate demand in the renovation and commercial projects markets, with little improvement experienced in the new build segment as public and private sector spend continued to stall.” said Booth.

“The reporting period was characterised by general economic uncertainty, currency volatility and constrained disposable income, all factors which served to subdue consumer confidence.  Price competition among industry participants intensified.”

In this context consumers gravitated to value for money offerings.

All three of the group’s brands, Italtile Retail, CTM and TopT, grew turnover and profit and gained market share across most of their merchandise categories.

Stores in the coastal markets and Limpopo province outperformed their counterparts. Once again stronger growth was reported in the lower LSM segment of the business than the top end.

“While margin pressure was experienced as a result of the deliberate strategy to contain price increases to the stores to support their value offering to customers, this impact was offset by efficiencies achieved through substantially improved stock management and cost containment,” said Booth.

“Historically, the group has delivered a stronger performance in the first six months of the financial year than the latter half.

This is a function of robust trading in the second quarter based on consumers having access to additional funds from bonuses and stokvel pay-outs and capitalising on in-store festive season promotional activity.”

In the context of continued socio-economic uncertainty and further constraints on discretionary spend anticipated in the forthcoming period, it is highly likely that this trend will persist, with the second half proving increasingly challenging for all participants in the sector, in his view.

Further investment will be made on expanding the business to achieve the group’s strategic growth goals, including expenditure on systems, technology and human resources – supported by Italtile’s cash reserves.

February 14, 2016; http://www.fin24.com/Companies/Retail/italtile-results-show-consistency-20160214

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