JSE-listed tile and bathroomware manufacturer Italtile has maintained its growth streak, posting a trading profit of R1.5-billion for the six months ended December 31.

This compares with a trading profit of R1.4-billion reported for the six months ended December 31, 2020.

The company had grown its system-wide trading profit from R361-million in the 2009 financial year, to R1.79-billion in the 2019 financial year and to R2.5-billion in the 2021 financial year.

Interim headline earnings per share (HEPS) were 83.9c, compared with HEPS of 77.1c posted in the prior comparable six months.

Italtile declared an ordinary dividend of 34c apiece for the period under review, up from 31c in the prior comparable period.

The company had 206 stores as of June 2021, comprising of retail brands CTM, Italtile Retail, TopT and U-Light, with Ceramic Industries and Ezee Tile Adhesive Manufacturers as its manufacturing businesses.

Italtile incoming CEO Lance Foxcroft tells Engineering News that the company experienced temporary store closures in December, marking the worst month in terms of staff Covid-19 infection rates, which set company sales back a bit.

Other Covid-19 challenges include severe disruptions to global supply chains, a situation that has been exacerbated by local ports delays. Foxcroft says stock availability across the industry has been erratic over the last 18 months and the company has witnessed various raw material shortages globally.

However, the company’s integrated supply chain and manufacturing capability has significantly alleviated supply volatility for the company and thereby given it a strategic advantage over competitors.

Foxcroft says the company has increasingly focused on manufacturing products locally, referring to those Italtile would normally have imported.

Between 75% to 80% of the products Italtile sells are made locally.

Moreover, what has been a positive impact of Covid-19, increased work-from-home activity and resultant uptakes in do-it-yourself home improvement projects throughout 2020 and early in 2021, has now started to wane in the reporting period.

Italtile reports that there has been a steady decline in home improvement-related demand as lockdown restrictions continue to ease or be lifted altogether, and disposable spend is channelled away from home improvement back to other discretionary and lifestyle pursuits.

BRAND PERFORMANCE

Italtile says its CTM brand’s performance in the six months under review is largely a reflection of a stressed state of the mass middle market consumer. While most of the brand’s key metrics improved, such as sales per person and average basket value, total transactions have declined.

The company remains focused on store presentation and revamps, having upgraded 14 stores in the period under review.

Following a strong performance in the 2021 financial year, Italtile Retail also posted improvements across all key metrics, with particular green shoots in the commercial projects division, which had seen some lower sales in prior financial periods.

The TopT brand continues to perform soundly, the company reports, with improvements recorded across most key metrics in the six months under review, including sales per person, profits, average basket value and productivity.

The company has identified ways in which to optimise these stores’ operations, including through enhanced procurement, planning and logistics.

The business model of TopT will be simplified to centralise these functions, thereby freeing up operators to focus on sales and in-store disciplines to provide a better customer shopping experience. 

The U-Light brand’s performance is still below management’s expectations, but the brand’s webstore has gained traction and is a valuable tool in the customer offering.

Going forward, Italtile plans on effecting a range of enhancements for U-Light, including growing market share in the external projects segment, where initial inroads have been made, and further developing the webstore offering.

Italtile’s other webstores – for Italtile Retail, TopT and CTM – remain well trafficked and, given the contribution the webstores make to the group’s offering of a multi-channel sales platform, management continues to invest in developing and enhancing capabilities.

CAPITAL PROJECTS

Foxcroft confirms that Italtile currently has a number of major capital projects in various stages of completion. The company spent over R520-million on capital projects in the first six months of the 2022 financial year.

The company’s R350-million Samca Plus factory was commissioned in November, which complements Ceramic Industries’ existing range with another premium-end import substitute offering.

A project to relocate and upgrade an Ezee Tile factory is also progressing well. It involves moving from a rented premises, in Germiston, Gauteng, to a company-owned site in Brakpan. This is expected to be completed by April.

Another capital project involves a retail node development in Boksburg, which will see all the group’s retail brands displayed under one roof, offering a specialist experience to customers. This will be launched within the next three months.

Moreover, a Ceramic Industries warehouse for sanitaryware is in the process of being upgraded to comprise more automated equipment.

Looking at the remainder of the 2022 financial year, Italtile is focused on growing market share in the tile segment catering for the mass middle market, particularly through the launch of new product ranges and ongoing store upgrades.

Italtile remains optimistic about opportunities for growth in the business and is targeting improved sales and profits for the full-year.