JSE-listed Italtile has declared an ordinary dividend a share of 38c for the year ended June 30, which is a 27% increase on the dividend of 30c declared for the prior financial year.
The higher dividend follows a strong trading profit of R1.5-billion, which is up 43% on the trading profit of R1-billion in 2017. Italtile reported a system-wide turnover of R8.7-billion, which is up 40% compared with 2017’s R6.2-billion.
The company’s headline earnings a share increased by 12% to 95c, compared with 85.1c in 2017.
The company’s store network grew by 9% year-on-year, from 162 in 2017, to 176 at present. The network comprises CTM, Italtile Retail and TopT stores.
The company also holds a 95.4% stake in Ceramic and a 71.5% stake in Ezee Tile Adhesive Manufacturing.
Italtile stated that the macroeconomic environment in South Africa remained subdued during the reporting period, despite gains in business and consumer confidence when President Cyril Ramaphosa was elected.
Consequently, consumers remained restrained with their spend on nonessential items, and discerning in their selection of retailer – with price/value proposition being a key driver of purchasing decisions.
Disappointingly, Italtile subsidiary Betta Sanitaryware underperformed on management's targets. Operational inefficiencies, exacerbated by warehouse space constraints, hampered the division's performance.
A new management team has been appointed and a comprehensive review and restructuring of the operation is under way to enable the business to meet the strong demand for its products.
After a difficult first six months, in which Betta Baths experienced various manufacturing challenges, remedial measures implemented served to address shortcomings, and the division reported an improved performance in the second half of the financial year.
Enhancing profitability in the business will be prioritised in the year ahead.
Italtile CEO Jan Potgieter told Engineering News Online that the company’s solid performance is largely a reflection of its resilient business model, which encompasses a strategic portfolio of strong retail brands that appeal to consumers across the income spectrum; a flat, low-cost organisational structure; strong partnerships with employees and other stakeholders; a customer-centric philosophy; an integrated supply chain; and sustained investment into offering value.
In terms of operations, the company’s focus has been to leverage opportunities for growth within the business, with various expansions planned for the rest of this calendar year and 2019.
Italtile will open 10 to 15 stores across the country throughout the 2019 year, including an Italtile retail store in Clearwater, and CTMs in Clearwater, Bruma and Giyani, as well as TopT stores spread across the country as the demand is determined.
Additionally, the company will open stores in Kenya and potentially also in Tanzania.
Ezee is targeting opening tile manufacturing facilities in Zambia and Zimbabwe and potential expansions of its existing tile manufacturing operations in Kenya.
“Italtile will continue to drive internal efficiencies and keep the momentum going into the next reporting period,” Potgieter said.
He added the company anticipates that its results for the first half of the 2019 financial year will be better than those of the comparable period in the 2018 financial year, owing to the low base effect.
Results in the second half of the year are, however, expected to be less robust than those of the second half of the 2018 financial year, unless country-specific risk factors reduce materially.
“Our goal for the new financial year will be to continue to deliver improved headline earnings growth.
“While the short- to medium-term socioeconomic forecast is pessimistic, we remain confident that our resilient business model will stand us in good stead, as it has done over the past 50 years.”