Financial Mail

Cracked but not broken

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It’s not exactly breaking news to say that the disposable income of the man in the street is under pressure, but a trading statement from Italtile demonstrat­es how severe the situation is becoming.

When the ninjas of the DIY world are forced to face the family with tears in their eyes, explaining in shame that they are having to pack away their grout floats and defer the purchase of the Marvel Silver Dream Gloss Glazed Ceramic Wall Tiles until the economy picks up, you know there’s trouble.

Fortunatel­y for Italtile and its shareholde­rs, it’s a robust operation that will be able to ride out the market downturn better than some of its competitor­s, and the Darwinian conditions may even spin out some opportunit­ies along the way. Italtile says that economic pressure and sociopolit­ical uncertaint­y meant that consumers grabbed the opportunit­y to curtail spending on home improvemen­ts and renovation­s, while the new build segment slumped markedly in both the public and private sectors.

The market may have turned down significan­tly in the second half, but Italtile has done an excellent job of limiting the damage, keeping the decrease in HEPS down to a couple of percentage points. The group has been concentrat­ing on reducing its operating costs and improving its working capital position, with cash reserves at the end of the period rising to R511m, while inventory levels dropped by

21%. This defensive positionin­g will enable Italtile to ride out the hard times and position it to bounce back effectivel­y once the money starts flowing and the dream kitchen is back on the agenda.

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