Iliad Africa aims for R5bn turnover

Building materials retailer Iliad Africa is set to achieve turnover of R5bn in its next financial year after raising turnover 24% for the 12 months to December.

The company reports an annual turnover of R4,2bn, up from the previous year's R3,4bn.

CEO Ralph Patmore said it had already grown turnover 10% in the current financial year thanks to acquisitions and while this year was expected to be tough, he said he hoped the company would add another 3%-4% to turnover through deals in the pipeline.

In addition, with tighter consumer spending, Iliad aimed to benefit from consolidation opportunities in the market, which Patmore said was fragmented.

Organic growth the main driver

Iliad's operating profit before investment income improved 25% in the year to December, from R278m to R347m.

Profit for the year grew 22% to R247m from R202m and headline earnings per share grew 22% to 168,4c from 137,5c.

Patmore said about 90% of the growth was a result of organic growth as the company's management had been distracted from acquisitive deals by an unsolicited bid from Absa Capital.

However, the current year was expected to be characterised by acquisitive growth as Iliad moved towards its 2005 target of R5bn in turnover.

He said the company was set to sign a deal this week or the next in this regard.

The company was looking at bolt-on acquisitions to existing sections in the company, which was split into general and specialised building material divisions, said Patmore.

This made integrating new additions easier, and enabled the company to benefit from its procurement power. In the fourth quarter of last year, Iliad acquired Gauteng-based Thorpe Timbers, a timber merchant that imports and sources local timber for redistribution to the construction, building and industrial market segments.

It also expanded its general building material division's geographic footprint through the acquisition of Eastern Cape based USM Building Materials with outlets in Uitenhage and Jeffreys Bay.

Iliad said that the 2007 financial year had seen growth in the residential marketplace slow as higher interest rates and the National Credit Act were felt by consumers.

However, the commercial market continued to show reasonable growth, as did the market for additions, refurbishment and alterations.

Pressure on margins

“Combined, these largely offset lower activity levels in the residential market.”

Iliad experienced pressure on gross margins during the year, but Patmore expected pressure to start easing as the company entered its second half and suppliers faced slowing sales and higher inventories.

The group had encountered pressure on gross margins through further enhancing internal efficiencies and making the most of its procurement abilities.

The company, which had been about to list on the JSE's alternative exchange, AltX, had become more reasonably priced thanks to the trading environment, he said.

Christ Gilmour, an analyst with Absa Asset Management Private Clients, said the company's results were in line with the segment, and were “strong”.

However, its share price had come off sharply in the past year after the private equity buyout fell apart.

Source: Business Day

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