JSE-listed Italtile has demonstrated resilience in delivering a solid set of results for the financial year ended June 30, with dividends and a capital expenditure (capex) programme remaining firmly in place, despite hampered manufacturing capability in April and May, and the continued indirect impacts of Covid-19.
Italtile declared a dividend of 33c apiece for the year under review, compared with a dividend of 41c apiece declared for the 2019 financial year.
The company’s trading profit declined by 16% year-on-year to R1.5-billion, while adjusted headline earnings a share were 82.3c, compared with the adjusted headline earnings a share of 101.8c reported for the prior financial year.
Italtile’s system-wide turnover of R9.3-billion in the year under review was 7% lower year-on-year. Retail store turnover declined by 3.9% year-on-year, with average selling price inflation estimated at 1.4%, compared with selling price inflation of 2.7% in the prior year.
Like-for-like retail store turnover decreased by 6.2% year-on-year in the year under review, but, prior to the lockdown, retail store sales were up 5.4% year-on-year.
CEO Jan Potgieter tells Engineering News that the company’s robust business model, its integrated supply chain, powerful brands and innovative technology helped to defend the business during the lockdown and subsequent impacts of Covid-19.
He says the direct cost of Covid-19 to the company was R5-million, but the indirect impact through loss of revenue, predominantly in April, was more significant to Italtile.
The company did not have to use a short-term contingency facility and trading restrictions had no material impact on the company’s debtor’s book.
However, double-digit sales growth in June to August, at between 11% and 14%, has been rewarding evidence of revenue recovery.
Potgieter believes the confinement of people to their homes during most of April, May and June resulted in people allocating resources to home improvement, which, coupled with low interest rates at the moment, bode well for Italtile’s sales, particularly its online sales.
Italtile’s retail brands are CTM, Italtile Retail, TopT and U-Light, represented through a network of 198 stores, including six webstores. The retail operations are supported by an integrated supply chain, comprising manufacturing and import operations, as well as a property portfolio.
Potgieter says the company’s focus during Covid-19 remained on prioritising the shopping experience for customers and entrenching retail excellence disciplines, and advancing Italtile’s store rollout and revamp programme – with 13 stores opened and 15 revamped in the financial year under review.
Further, the company focused on expanding the U-Light business to five stores and a webstore and prioritised better stockturn and product mix.
Italtile achieved improved manufacturing efficiencies and reduced waste during the last few months, despite lower production volumes, and drove overall productivity to gain market share and become more competitive.
Potgieter says the company will continue with its capex programme of R800-million over the next 18 months, some of which will focus on increasing local manufacturing capability.
For example, through the launch of Italtile’s EcoTec tile manufacturing process, in the Ceramic Industries division, the company will reduce its carbon footprint – by reducing packaging by 25% and emissions by 30%, while offering the market a product made from locally sourced materials.
Moreover, Potgieter believes Italtile is well positioned to cater to changed consumer behaviour during and beyond the pandemic.
He notes that customers do more research before making a sale, particularly online, and prefer to touch and feel products in a safe environment, from trusted brands, instead of going from store to store to compare products.
Among the key achievements reported by Italtile’s CTM brand was the launch of a multi-surface tile visualiser, innovative technology which enables customers to digitally view CTM’s tiles in their homes and match wall and floor tile offerings in lifelike reality.
Market share was also gained in the bathroomware category.
CTM’s footprint was expanded into the rest of Africa with the opening of one new store in Botswana and two stores in Kenya. The brand now has a network of 94 stores.
This division’s results were negatively impacted by a downturn in the upper-end Living Standards Measure market, despite a pleasing operational performance in the year under review.
However, Potgieter notes that, after year-end, there has been an uptick in activity in the brand’s retail market segment, which is encouraging.
During the year under review, Italtile Retail retained market leadership in terms of range and availability of large-format floor and wall tiles and local porcelain tiles as well. The brand enhanced its omni-channel experience through an upgrade to the webstore platform, with a specific focus on mobile accessibility, while the brand also entered the vinyl floor market.
Italtile Retail’s footprint was expanded with the opening of one store in Botswana, bringing the total store network to 14.
Potgieter notes that the TopT brand delivered revenue and profit growth despite the lockdown and trading restrictions towards the end of the year under review.
He says this brand implemented a business-critical framework to ensure consistent stockholding and range across all stores, improved social media content to engage customers more effectively online and increased participation in regional community projects to raise brand awareness.
In this division, Italtile converts underperforming franchised stores to company-owned stores with prospective joint venture partners to afford the company better visibility of performance and higher return on investment.
TopT’s store network comprises 84 stores.
While the first six months of the new financial year will be difficult, considering that the impact of the pandemic persists, Potgieter is confident that the company will start to see more positive sales and profit growth in the six months starting from January 2021.