Italtile, SA’s biggest retailer and manufacturer of tiles, bathroom-ware and related products, announced a record R450m interim payout to shareholders, confident in its ability to manage surging input costs and waning, pandemic-induced demand for home improvement.
Though the industry faces surging transport and energy costs, CEO Lance Foxcroft told Business Day it hadn’t needed to pass these on to customers.
The payout for the six months to end-December amounts to 34c a share, up 10% from a year earlier, even though revenue dipped in the review period.
“We are focusing on what we do well, our merchandising and in-store experience, as well as making sure we are getting the volumes through our factories,” he said.
Group turnover decreased 1% to R6.1bn while after-tax profit rose 4.8% to R1.07bn, thanks in part to a 2% decline in operating costs.
While a rise in trading profit was derived mostly from price inflation, which had largely been deferred over the past year, Italtile said its performance was pleasing given 2021’s high base.
More time spent working and studying at home, along with less spending on travel and entertainment and low interest rates, had prompted a boom in SA home improvement, which has fallen off recently as consumers channel more of their spending to the outside world.
The group is also facing a margin squeeze and increased competition, and it noted that SA’s middle-income market appears to be especially stressed. Due to the severe bottlenecks in supply chains, stock availability across the industry has been erratic over the past 18 months, while energy and freight costs had surged, it said.
Recently, however, after prolonged shortages, stock levels have risen disproportionately to demand as beleaguered customers reduced spend, the group said.
Italtile says sourcing about 80% of its products locally remained a strategic advantage.
Foxcroft is the former CEO of Italtile’s manufacturing subsidiary, Ceramic Industries, and took over from Jan Potgieter at the beginning of 2022.
Small Talk Daily analyst Anthony Clark said the overall results were quite pleasing, but that there was nothing pointing to an upward break for the group’s shares in the absence of a significant improvement in SA’s economy.
Italtile was already quite efficient, said Clark, and the group could benefit from Foxcroft’s manufacturing background.
“I think going forward any more incremental cost benefits that Ceramic Industries can eke out could significantly benefit any margin erosion they see in the greater retail base,” Clark added.
The group’s retail brands are CTM, Italtile Retail, TopT, and U-Light, represented through a total network of 209 outlets, including six online stores.
Foxcroft said on Thursday that Italtile was continuing its store expansion and revamp programme, and is back to its previous target of 10 to 15 new stores a year.
The group has also punted its online presence as an advantage over competitors, saying it gained a significant first-mover advantage in having introduced web-stores about seven years ago.
Italtile will continue to invest in its online presence and while competitors had been spending heavily, the group still had an advantage, Foxcroft said.
“We are also sort of unique in our ability to deliver efficiently from our brick-and-mortar stores, which are quite distributed throughout the country,” he said.
The group, valued at R21.1bn on the JSE, declared a 34c interim dividend, up 10% year on year, and representing about a R450m payout to shareholders.
Italtile shares were trading 0.56% higher at R16.09 in afternoon trade on Thursday, valuing the company at about R21.1bn. The stock has risen almost a quarter over the past two years, roughly coinciding with the Covid-19 pandemic.
Update: February 2 2022
This article has been updated with additional information throughout.
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