Home ren­o­va­tors boost Italtile profit

Dur­ing a tough eco­nomic cli­mate, com­pa­nies usu­ally have to tighten their belts. But Italtile Ltd is see­ing growth op­por­tu­ni­ties as lo­cal con­sumers opt to ren­o­vate their homes, rather than buy­ing new ones, Italtile CEO Nick Booth told Fin­week.

Finweek English Edition - - INSIDE - BY JACO VISSER

In­debted South African con­sumers, who are still reel­ing from the bub­ble in un­se­cured l end­ing a nd t he s ub­se­quent col­lapse of African Bank, for­merly the largest len­der of its sort, are still shy of buy­ing new prop­erty. And banks are shy to for­ward credit.

This boasts a po­ten­tial chance for Italtile Ltd to cap­i­talise on the home­im­prove­ment mar­ket, ac­cord­ing to its CEO Nick Booth.

“Rather than selling their homes and buy­ing new ones, own­ers are ren­o­vat­ing,” Booth, who took over as CEO in July 2014, told Fin­week, fol­low­ing the an­nounce­ment of the group’s an­nual re­sults at the end of Au­gust.

It al t i l e Ltd, t he own­ers a nd fran­chisor of re­tail­ers such as Italtile, CTM and TopT, that sell lo­cal and im­ported home-f inishing prod­ucts posted a 37% jump i n prof it and in­creased its to­tal div­i­dend by al­most a third.The com­pany’s sys­tem-wide rev­enue rose 17% to more than R5.2bn for the 12 months end­ing 30 June. Same-store sales rose 16% com­pared with t he pre­vi­ous f i nan­cial year. Italtile Ltd for­feited mar­gins in a bid to keep its mar­ket share in a strug­gling con­sumer mar­ket.

“We saw re­silience in the lower LSMs as con­sumers in those bands don’t worr y too much about t he ex­change rate and big pic­ture econ­omy. They just want to im­prove their homes,” said Booth.

While the group’s top-end re­tail brand, Italtile, took the brunt of the rand’s de­pre­ci­a­tion over the pe­riod as it re­lied on im­ported prod­ucts the most, its TopT brand was rolled out faster than the com­pany an­tic­i­pated.

With its store sizes of bet ween 500m2 and 600m2, the com­pany is able to ex­pand into out­ly­ing and ru­ral ar­eas where it is un­der­rep­re­sented and where higher-value of­fer­ings of home­im­prove­ment prod­ucts, such as Tivoli taps and im­ported tiles, are not read­ily ac­ces­si­ble, Booth said.

“What TopT in ru­ral ar­eas of­fers con­sumers now is a one- stop shop where they can buy all their home­im­prove­ment prod­ucts,” ac­cord­ing to Booth. “This is es­pe­cially im­por­tant in light of high trav­el­ling costs in these ar­eas.”

Wealth­ier con­sumers were more ret i cent i n t heir spend­ing as t he

ITALTILE LTD POSTED A 37% JUMP IN PROFIT AND IN­CREASED ITS TO­TAL DIV­I­DEND BY AL­MOST A

THIRD.

Go­ing for­ward, Italtile hopes to open be­tween five and 10 new TopT stores an­nu­ally.

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