Despite consumer spending slowing appreciably during the six months ended December 2012, weighed down by increased utility costs and higher fuel and food prices, ceramic product distributor Italtile reported a 15% rise in its trading profit to R312-million.

The company stated that this reflected tight cost control and, after several consecutive years of absorbing pricing pressure and sacrificing margins in the context of substantially higher input costs, modest inflation-linked price increases implemented in the retail network.

Economic uncertainty, a lack of job security, high levels of unemployment and indebtedness, as well as tighter lending criteria in the unsecured lending market also hampered consumer spending as evidenced by markedly reduced footfall in certain of the group’s operating regions.

As a result, some of Italtile’s traditionally robust rural markets failed to match historical growth levels, while it was likely that the impact of the recent strike action on these communities further reduced disposable income, resulting in a less buoyant December trading period.

The group’s traditional core market, namely inland suburban communities, delivered good growth, while the coastal regions lagged their counterparts.

Further, economic instability in the company’s European markets provided good buying opportunities; however, the steady depreciation of the rand over the period served to partially negate the benefits of importing product.

Compared with the same period in 2011, system-wide turnover improved by 10% to R2.04-billion, revenue from group-owned stores grew 14% to R1.08-billion and franchised stores increased turnover by 6% to R956-million.

Basic earnings a share and headline earnings a share increased 12% and 13% respectively, to 24.2c and 24.3c. Net asset value per share increased by 15% to 236c, marking an improvement from the 205c recorded in 2011.

The group’s cash and cash equivalent reserves at the end of the period were R453-million, up from R904-million in the 2011 corresponding period, reflecting the R529-million investment to acquire a strategic stake in Ceramic Industries and capital expenditure of R95-million to enhance the quality of the property portfolio.

In November, independent Ceramic Industries shareholders accepted a conditional joint offer from Italtile and one of its shareholding companies Rallen to acquire 5.5-million of Ceramic Industries’ ordinary shares at R130/share.

Consequently, Italtile’s total beneficial interest in Ceramic was 20% of the issued share capital of the company and Rallen’s total beneficial interest was 60.95%.

Italtile indicated that key to its growth during the reporting period was a refined and improved product range across the group’s brands, the strategy to up-sell complete solutions of products rather than individual commodities and the continued growth in the group’s bathroomware division. An average 9% increase in sales volumes was recorded.