Italtile lays down marker with big gains

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The group, whose retail chains comprise Italtile Retail, CTM and TopT in 126 stores across SA, Southern and East Africa, recorded doubledigit growth in both measures. Its products include sanitaryware, bathware and laminated flooring.

It said the renovations segment of the building industry continued to grow, but there had been no material recovery in the new build segment as infrastructure constraints in water, sanitation and power had hampered new housing developments.

"This situation is expected to persist," the group said.

Despite this, it delivered improved sales and profitability across each of the retail brands, its supply chain businesses, and across most of the merchandise categories.

This was attributable to better execution of basic retail principles and best practice in store, as well as improvements in the important backend functions of suppliers, systems, and logistics, CEO Nick Booth said.

"It's a solid result, based on us focusing on what we can do right."

Group turnover grew 17%. Margins were forfeited in both supply chain and retail operations to absorb increased costs and offset the effect of rand weakness, which drove up costs of imported products.

Trading profit increased 21% to R905m as overheads were reduced by improving the management of utilities, and containing delivery and transport costs. Headline earnings per share shot up 22%.

Growth mainly came from lowerto-middle-income groups targeted by Italtile - through TopT and CTM - but "there was a bit of growth in the rest of the brands", Booth said.

He said provincial governments had not lived up to expectations when it came to providing water and sanitation networks to support new housing developments.

"It is an eye-wateringly good performance for an economy 'supposedly' in recession," Anthony Clark, a small and medium cap equity analyst at Vunani Securities, said yesterday.

"All of its divisions performed well in tough trading conditions ... and saw market share gains," he said.

The low-cost chains had shown superior growth, he said. With completion of low-cost housing by the state at a low, "are the masses taking matters into their own hands and building themselves?" he asked.

Italtile said there had been a big deterioration in investment sentiment and property spend as consumer confidence fell to record low levels. "In the middle-income market, the core target audience, consumers remained highly price sensitive and value conscious," the group said.