Italtile weathers the tough economy


Italtile weathers the tough economy

Published Date: 2020-02-10 | Source: Stephen Gunnion | Author: Stephen Gunnion

Italtile weathers the tough economy

The tile manufacturer and retail has managed to grow first-half earnings but has toned down its guidance for the second six months.

Italtile has tempered expectations for full-year growth as the weak economy continues to weigh on sales. After muted first-half growth, the tile manufacturer and retail says the second six-month period is likely to be much the same.

In a trading statement, Italtile said trading conditions remained lacklustre in the six months to end-December, with household discretionary spending severely constrained. Despite that, it 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 in 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 will leave earnings per share (EPS) between 2% lower and 2% higher than the 55.4c reported in the comparative period, while headline EPS will be flat to 2% higher. Excluding the empowerment charge, EPS will be up by between 4% and 7%, with HEPS rising by 6% to 8%.

While the group previously guided investors to expect an improvement in second-half earnings relative to the first half, it now expects growth to be in line due to the continued deterioration of the economy and the impact that's had on the retail and construction sectors.

Its shares retraced early losses to close unchanged at R12.99 on Friday.

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