Italtile's Millennial-look CTM store format
JSE-listed bathroomware manufacturer Italtile delivered a solid performance for the financial year ended June 30, despite sluggish economic growth and dampened consumer spend.
The group posted a 70% increase in trading profit to R2.5-billion, compared with the trading profit of R1.5-billion posted for the year ended June 30, 2020.
CEO Jan Potgieter told Engineering News that even by 2019’s standards, the group delivered a good performance, and not just coming of 2020’s low base.
Retail store turnover in the year under review increased by 26% compared with the 2020 financial year and by 22% compared with the 2019 financial year.
Total system-wide turnover increased by 25% year-on-year to R11.6-billion, which was also 16% higher than turnover for the 2019 financial year.
Italtile declared a final gross ordinary dividend for the reporting year of 25c, which takes the total dividend for the year to 56c – a 70% increase on the 2020 dividend of 33c.
The group had also declared a net special cash dividend of 40c, as a result of the company’s strong cash generative nature and cash reserves being in excess of operational requirements. This was the fourth special dividend paid in four consecutive financial years.
The company had cash reserves of R1.1-billion at the end of the reporting year, despite substantial cash outflows of R2.5-billion.
Potgieter said some cash is being directed towards the company’s R800-million capital expenditure (capex) programme, which is being executed over the next few years.
Capex for the year under review totalled just over R1-billion, and the company plans to spend R850-million on capex in the 2022 financial year.
During the year under review, capex of R420-million was incurred on the retail portfolio on an ongoing store upgrade programme and the acquisition of eight properties.
The company’s retail property portfolio was valued at R3.5-billion at the end of the year, while its manufacturing portfolio stood at R1-billion.
A further R462-million was spent across the manufacturing operations on plant, warehouse and equipment upgrades.
The four capex projects include a retail node development, in Boksburg, Gauteng, which will see all the group’s retail brands displayed under one roof, offering a specialist experience to customers.
Italtile is also relocating an Ezee Tile factory to a self-owned facility in Brakpan, Gauteng, with start-up expected early next year.
The group is also investing in a Ceramic Industries warehouse that will be mostly automated and provide more space to build up key stock inventories, while another factory is being rebuilt with advanced technology for improved manufacturing efficiency, as well as fewer carbon dioxide emissions.
Italtile has a store network of 206, up from 198 in the prior year, comprising of retail brands Italtile Retail, CTM, TopT and U-light. The company also has six webstores, which, during the reporting year, saw an increase in unique visitors as customers are increasingly doing research on products before visiting physical stores to conclude a transaction.
Potgieter considered the company’s webstores as a promising space to gain more market share and share of wallet, as Italtile continues to invest in technology and innovation in this regard.
The group’s retail operations are supported by a vertically integrated supply chain comprising of manufacturing and import operations. Italtile’s manufacturers are Ceramic Industries and Ezee Tile Adhesive Manufacturers, while the import businesses are Cedar Point, International Tap Distributors and Durban Distribution Centre.
Potgieter noted that the group’s mindset had evolved from single-minded survival mode in 2020 to a profound sense of gratitude for blessings amid challenges faced in 2021. He attributed the company’s continued success to an agile and resilient team, a robust business model and extensive improvements to operations having been made over the last three years.
Italtile’s retail brands all posted improvements in sales and profits, as well as improved customer sentiment scores, which was reflected by a gain in market share in their respective segments.
Potgieter mentioned that CTM continued to roll out its “Millennial-look” store formats and its Sithi Wena marketing campaign, while TopT still had its successful interactive Woza Ekhaya campaign, which culminated in one customer winning a new home.
Moreover, Italtile said its manufacturing operations during the review period benefitted from a range of conducive factors that drove volumes, including robust demand caused by enforced-stay-at-home orders; low interest rates; severe import supply chain disruptions; a weak currency; high shipping costs and a ‘buy-local’ consumer philosophy.
Ceramic Industries grew its market share of the import substitute segment and was likely to continue to build on those gains. The tile factories all reported improved productivity and cost leadership, and successfully expanded the range of the new low-carbon EcoTec tiles.
Potgieter said the Covid-19 pandemic would continue impacting on the economy and the company, but these would be mitigated as best as possible by clear-cut strategies, responsive systems, hands-on management and the company’s resilient business model.
He expected the results for the first half of the new financial year to be in line with the prior corresponding period, while the second half’s performance was difficult to predict owing to uncertain trading conditions.
Italtile planned on opening 10 to 15 more stores in the 2022 financial year, growing the contribution of U-Light to the business and expanding the group’s existing retail and manufacturing footprint in the rest of Africa.