Italtile grows earnings in challenging environment


Italtile grows earnings in challenging environment

Published Date: 2020-02-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Italtile grows earnings in challenging environment

The tile manufacturer and retailer has continued to open new stores and is piloting a new lighting division.

Italtile pulled out all the stops to grow first-half earnings in a challenging operating environment. To help counter poor trading conditions and weak consumer demand, the tile manufacturer and retailer said it competed vigorously to win market share, increased productivity and continued investing across its businesses. It also had to contend with load shedding, particularly in December, which resulted in an additional R12 million in direct costs at its manufacturing division, including diesel for its generators.

For the six months to end-December, the group grew turnover by 1.4% to R5.4 billion, including the retail turnover of its franchised stores but excluding internal sales. Turnover at its retail stores rose 4.5% as it raised prices by an average 1.5%. Like-for-like retail store turnover growth of 1.7% was below management's benchmark.

In its manufacturing division, Ceramic Industries' sales were flat due to the softer consumer demand which left tile wholesalers sitting with too much stock. However, it said remedial action at adhesives business Ezee Tile resulted in sales growth of 7.3% after a disappointing performance the previous year. That left total manufacturing sales 1.3% higher, with estimated selling price inflation of 1%. Italtile owns 95.5% of Ceramic 71.5% of Ezee Tile.

During the six months, it incurred a once-off charge of R39 million after concluding an empowerment deal with Yard Investments. The effect of the transaction left earnings per share (EPS) flat at 55.3c, while headline EPS were 1% higher at 55.3c. Excluding the empowerment charge, EPS rose 5% to 58.4c, with HEPS rising by 7%, also to 58.4c. It's increased its interim dividend by 5% to 23c per share.

It opened 10 new stores over the six-month period and plans to open another five to eight by the end of June. In total, 15 stores were revamped. It has also entered the lighting market with five pilot U-Light stores which will determine the future viability and scalability of the model.

The group said second-half growth was likely to be in line with the first six months. Its shares closed 2.1% higher at R13 yesterday.

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