Johannesburg - JSE-listed building materials supplier Iliad says it has continued its earnings growth trend but expects 2009 to be a difficult year.
For the year to end-December, Iliad posted a 10% rise in turnover to R4.6bn, while earnings per share grew 5% to 177.2c and profit for the period went up by 2% to R251.6m.
It declared a cash dividend of 52c per share, and said that headline earnings rose 1% to R249.7m.
"This continues the group's record of growth since listing in 1998," CEO Eugene Beneke said.
Iliad sources, distributes, wholesales and retails general and specialised building materials to a range of customers, from large-scale contractors to do-it-yourself homeowners, through 112 stores nationwide.
Some of Iliad's brands include Ferreira's, D&A Timbers, Campwell Hardware, Builders Market, Laeveld Bouhandelaars, USM Building Supplies, National Tile Traders, Tile & Décor Mart, Rietpan Hardware & Building Supplies and Just Tiles.
Beneke said a "significant increase" in distribution expenses and the cost of fuel, together with tougher market conditions, resulted in a slight decrease in the operating margin from 8.3% to 7.6%.
In late 2008, the petrol price reached record levels at over R10 a litre. "We do expect to benefit from the lower fuel costs in 2009," he said.
Operating profit rose by 2% to R354.3m.
Beneke said slowing activity had been particularly evident in the residential market as demand continues to contract, with the most pronounced effect being in larger towns and metropolitan centres.
Acquisitions may be on table
"The start of several new housing developments has been postponed given the state of the market, protracted effects of the introduction of national credit legislation, concerns about power supplies and the slow pace of regulatory approvals."
"The non-residential market, which until now has countered slowing residential activity, began to reflect the downturn as the rate of growth (measured by building plans passed) slowed in the second half, albeit off an extremely high base.
"The market for additions and alternations, which is directly correlated to personal disposable income, has slowed, but should improve once falling interest rates take effect."
Beneke said the group will relook at its cost base to mitigate any potential risks. "It's difficult to predict what will happen in 2009.
"Iliad enters the year on a sound footing. We expect the seasoned trading skills of management and the focus on operational efficiencies to greatly assist in dealing with some of the pressures common to economic downturns.
"Although tougher market conditions are expected to impact on group turnover, Iliad will leverage its conservative debt structure and strong cash-generative ability to generate the cash flow required to fund anticipated acquisition opportunities."
However, he feels strongly that as the challenge deepens for many companies in the sector, there will be more opportunities that will arise at cheaper prices, specifically in the second half of 2009.
"We believe that acquisitions will come in 2009. But the fact that we may take advantage of this doesn't equate to the industry also coming out of a slowdown," he said.
- Fin24.com