Italtile ups turnover

Johannesburg - Tile and sanitaryware retailer Italtile [JSE:ITE] on Thursday reported a 2% decline in diluted headline earnings per share (Heps) to 17.5 cents for the six months ended December 2010 from 17.9 cents previously. Adjusted Heps increased 13% to 17.6 cents.

The group's system-wide turnover was 10% higher at R1.59bn, while group-owned stores grew revenue 11.4% to R771m and franchised stores improved turnover 9.4% to R814m. Real organic growth, excluding new store turnover contribution of 1.0% and price deflation of 0.1%, equates to 8.9%.

Reported trading profit rose 14% to R231m primarily as a result of operating cost containment and improved contribution to profitability by the group's supply chain partners, as well as a R3m profit on disposal of property, plant and equipment.

The group's operating margin remained firm as a result of intensive cost control and improved supply chain and in-store efficiencies.

It declared an unchanged interim dividend of 6 cents per share.

The group said the industry remained under intense pressure during the review period, constrained by limited new build activity and subdued growth in the renovations market.

The stronger rand afforded short-term advantage to opportunistic importers, resulting in an influx of imported product from a range of countries, and more significantly, a proliferation of very low-priced entry-level tiles, a trend last experienced three years ago. The average selling price of imported product declined by 10%, exerting price pressure on the value-for-money segment of the market specifically.

Italtile's CEO Gianpaolo Ravazzotti and eight of his colleagues and business partners died tragically in a plane accident earlier this month in the Robberg area near Plettenberg Bay. A full investigation is underway to determine the cause of the crash.

"Each and every one of those who passed away in this accident was an important part of the broader Italtile family and played a valuable role in the business. Their camaraderie and contribution will be missed. As colleagues and friends we offer our deepest sympathies to their families," Chief Financial Officer Peter Swatton said on behalf of the board.

Looking ahead, the group said improving the in-store shopping experience is a major driver for the group. Constant re-evaluation of the retail trading format is key to capitalising on growth opportunities and consequently the focus on range, service, systems and supplier relationships will continue to be re-examined and enhanced. Innovation and training will underpin this strategy.

It is anticipated that growth in the global economy will remain subdued over the short to medium term. In South Africa the building and construction industry particularly will be subject to continued pressure. Notwithstanding this environment, the group is satisfied that growth at current levels can be maintained in the forthcoming six months, it said.