General and specialised building materials provider Iliad has lifted group earnings before interest and taxes to R59.2-million for the six months ended June 30, from R58.7-million in the first half of the prior year, realising upside from stringent cost control and strategic procurement, the company said on Tuesday.

The group recorded earnings of 31.8c a share for the six months, compared with earnings of 30.3c apiece for the comparable 2014 period, while headline earnings improved from 30c to 31.4c over the same period.

Group revenue, however, declined by 0.9% to R2.09-billion, which Iliad said reflected the continued subdued trading environment, while year-on-year expenses increased 1.2%, which CEO Eugene Beneke attributed to continued focus on expense management to partially negate costs associated with investing in key strategic initiatives.

Operating profit grew from R58.7-million in the first six months of 2014 to R59.2-million in the period under review, while improved working capital management resulted in Iliad ending the period with net cash of R29.2-million, compared with a net overdraft of R68.2-million at the end of the first half of the prior year.

“The past few years have been a challenging period for the building material supply industry [but] our ongoing focus on procurement efficiency and improving cost structures has countered these conditions to some extent . . . [and] we’re pleased that, in a difficult trading environment, we’ve been able to manage the controllables of the business in such a way that we’ve been able to deliver earnings growth.

“We believe that’s quite commendable and our balance sheet is strong, and it’s a nice position to be in in a tough market,” Beneke told Engineering News Online on Tuesday.

INFRASTRUCTURE GAP
He added that the industry had yet to realise the knock-on effects of government’s long-touted infrastructure build programme, with little evidence of these projects reaching the market.

“From a building materials provider’s perspective, we would have [expected] to see more activity. We haven’t seen a significant increase in those activity levels . . . and, [while we’ve] seen growth in the cash side of the industry, which services the do-it-yourself customer, the subdued trends are more prevalent in the contractor’s segment.

“This segment we service through credit and it is the part of the market that, among others, would be [strongly] directly or indirectly supported by infrastructure projects. So, I believe there’s more to be done,” he reasoned.

The group’s general building materials division produced a mixed performance, with the inland subdivision recording pleasing improved bottom-line results, while the coastal subdivision’s results were more subdued, but remained profitable.

In the specialised building materials division, all business clusters were profitable, while subsidiary plumbing and hardware distributor Cachet delivered a “notable” result.

BUY-OUT
Iliad, meanwhile, informed shareholders in July of the “firm” intention of South Africa-based international furniture and household goods retail chain Steinhoff International Holdings to make an offer to acquire the entire share capital of Iliad for R1.3-billion.

The company would, by the end of this month, issue a circular to shareholders notifying them of a general meeting to be held in September at which they would vote on the proposed deal.

The acquisition would be carried out through a scheme of arrangement, with the offer price at R10 a share, plus a 24c special dividend to be paid by Iliad before the date on which the scheme would become effective.

PROSPECTS
Beneke added that, as previously reported, the company would continue to leverage its newly integrated enterprise resource planning platform to facilitate various projects that will improve its competitive position.

“We expect various initiatives to assist in protecting gross margins. Our brands will enjoy further exposure through various marketing campaigns and we aim to continue to optimise our portfolio and conduct feasibility studies to expand into new geographic locations,” he commented.

The expansion of the company’s footprint would remain a priority going forward, with several feasibility studies under way in Gauteng for the possible roll-out of additional retail outlets.

Iliad, meanwhile, expected marginal revenue growth in 2015 – a year expected to continue to be challenging and competitive.

Beneke reaffirmed that the group, however, remained “convinced” that it had set the foundation for sustainable growth into the future. 

“This industry has adjusted to evolving trading conditions and the market remains very competitive. The infrastructural efficiencies implemented during the period, stringent performance targets, realignment of the portfolio and implementation of various key strategic initiatives ensure [that we are] well positioned to capitalise on opportunities when growth gradually returns to the market.

“For the rest of the year, we’ll continue to look for the opportunities that are out there. The country needs houses, offices and warehouses, so we’ll seek those opportunities and pursue them,” he concluded.