Italtile to expand retail footprint

9th September 2016

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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With prevailing economic and sociopolitical conditions unlikely to improve in the coming year, JSE-listed ceramic tiles retailer Italtile states that, to sustain results at current levels, “opportunities for growth have to be realised within the business”.

Further, despite expected growth in the home improvement segment, forecasts for increased new-build activity are less positive, while competition in the market will intensify as participants strive to retain and gain market share, the group stated in a press statement last month.

Italtile will, therefore, continue to expand its store network, including the opening of an additional 15 TopT stores by March 2017, with four stores to be opened in the Western Cape in the next few weeks. The 11 remaining stores will be split among the Eastern Cape, KwaZulu-Natal and Gauteng, Italtile CEO Nick Booth told Engineering News last month, following the group’s results presentation.

The group also aims to accelerate the expansion of CTM and Italtile by opening more stores in the following year.

Further, the group had capital expenditure plans of about R300-million related to buildings and properties, with part of this drive being into Kenya, Booth explained.

While Italtile already has a base in Kenya, operating two stores, the group aims to build three stores under the CTM retail brand in the country in the next financial year, which are expected to be operational in two years’ time.

The group is also considering the potential acquisition of stores in Tanzania.

Further, assuming the successful conclusion of the acquisition of Ceramic Industries, the group will integrate the information technology platform of the business and the Ezee Tile operation into its own.

Share Capital

In July, Italtile submitted a binding offer to Ceramic to further acquire up to 73.5% of the company’s issued share capital, with a further consequence of the acquisition being the increase of the group’s total effective holding in Ezee Tile to 68.95%.

However, the acquisition is subject to the attainment of certain conditions precedent and approval from competition authorities and Italtile shareholders.

In July, the Competition Commission ruled that it prohibited the proposed acquisition of Ceramic Industries and Ezee Tile Adhesive Manufacturers, finding that “there would be no viable alternatives for competitors in the downstream retail market [and] that the merged entity could foreclose retailers by raising prices, reducing supplies or refusing outright to supply”, Engineering News reported in August.

Italtile opposed the commission’s ruling and, last month, submitted a request for consideration to the Competition Tribunal. The group is awaiting a date for the prehearing.


Italtile last month reported a systemwide turnover increase of 14% to R5.96-billion for the year ended June 30.

Retail Stores In expanding its retail footprint, the group opened 20 new stores during the reporting period, including 15 TopT stores, three CTM stores and two Italtile retail stores. The group also launched a CTM Web store in Kenya.

Italtile reported that particular emphasis was placed on introducing “flexible store formats to align each offering optimally with its respective market”. This flexibility enabled the group to gain market share in existing and new markets.

“Improved performances were reported by the group’s retail operation, comprising Italtile Retail, CTM and TopT, with each brand recording double-digit sales growth and a gain in market share across its trading regions and merchandise categories,” Booth said last month.

CTM was the biggest contributor to profit and turnover, while the best growth performer for the year had been the TopT retail brand, Booth told Engineering News, adding that he expected a similar performance in the next financial year.

Booth attributed the gratifying performance to the “continued expansion of the Busines Optimisation Programme across key areas of the group, which facilitated further improvements within the business and a meaningful gain in market share from competitors”.

Basic earnings per share increased by 16% year-on-year to 87.8c, while headline earnings per share increased by 21% to 86.9c.

Italtile, which holds a 20% strategic stake in manufacturer and primary supplier Ceramic and a 46% stake in Ezee Tile, a national manufacturer of grout, adhesive and related products, also reported that the combined contribution from Ceramic and Ezee Tile to group profits increased by 53% to R95-million. Ceramic’s contribution to group profit for the period rose 51% to R83-million.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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