Results show Italtile is on the right track
Market share increases, service improves
LOCAL and imported tiles importer Italtile yesterday reported a 16 percent increase in trading profit to R1.05 billion for the year to end June, with increasing market share and improved customer service playing a major role in the results.
The group said that its retail brands and all of its support and supply chain businesses reported the biggest increase.
Chief executive Nick Booth said the group embarked on a clear strategy and structure and identified opportunities for growth, both within and outside of the business.
Booth said system-wide turnover increased by 14 percent to R5.96 billion, up from R5.22bn reported last year.
He said the like-on-like revenue at the retail store level also grew 14 percent compared with total retail growth of 17 percent.
Basic earnings per share rose by 16 percent to 87.8 cents per share, from 75.9c per share, while headline earnings per share increased 21 percent to 86.9c per share, up from 71.6c per share reported in 2015.
The group’s retail operation comprises three brands: Italtile Retail, CTM and TopT, with a total network of 146 stores in southern and east Africa. The group opened 20 new stores during the period with TopT accounting for 15, Italtile Retail for two and CTM for three.
Growing demand
“The full impact on revenue of the 20 new stores opened in the review period will only be reflected in the following six months,” said Booth.
Inventories rose to R693 million, up from R479m for 2015, to meet growing demand from the existing retail operation as well as the new stores added to the network during the period. “The increase also reflects the weakening of the rand, which impacted on the landed cost of imported inventory, as well as the introduction of the shower enclosure merchandise category into the supply chain operation,” Booth said.
Italtile said it would go ahead with plans to acquire Ceramic Industries, despite the ruling by the Competition Commission that blocked the move.
“We have lodged an appeal with the Competition Tribunal and we are still waiting for the response,” said Booth.
Italtile submitted a binding offer to Ceramic to acquire up to a further 73.5 percent of the company’s issued share capital for a possible R3.75bn. It declared a gross cash dividend for the year of 29c per share, 16 percent higher than the 25c per share declared in 2015.
Thebe Stockbroking senior research analyst Janine Weilbach said the results were in line with the trading update at the end of July.
Weilbach said both gross margin and trading margin expanded on the back of tight cost containment and efficiencies in the supply chain in a very competitive and low growth newbuild market.
“Management highlighted double-digit growth and market share gains across all three brands, with margins either stable or improving based on better product mix and product expansions. We also saw a 53 percent increase in profit contribution in the Ceramic Industries,” Weilbach said.
“The new Gryphon plant launched in financial year 2016 is also expected to increase revenues over time as it competes better with imported products in a weak local currency environment. We also expect the consolidation of Ceramic Industries during the course of financial year 2017 to add significantly to earnings.”
Italtile shares gained 6.23 percent on the JSE yesterday to close at R14.50.