Italtile shareholders can expect a bonanza

Siseko NjobeniItaltile shareholders are in for a bonanza after the supplier of ceramic tiles and related products announced a special dividend and a change in policy on Wednesday that will allow the company to return excess cash to shareholders through higher payouts.

After another stellar year in which turnover, profits and net cash rose, Italtile improved the dividend cover from three times to two and a half times. Dividend cover measures the number of times that a company could pay dividends to its shareholders based on earnings.

The company reported the improved financial performance despite subdued economic growth and relentless pressure on consumer disposable income.

Italtile CEO Jan Potgieter attributed the group’s solid performance during the year to improvements made in its operations as well as “robust” cost containment, “rather than improved sentiment or spend by customers”. SA consumers remained under pressure and were spending less on non-essentials, he said.

With the slowdown in the building and construction sector in SA, the company had seen increasing demand from customers looking to do their own renovations, he said.

The change in the dividend policy could enable the company, which has excess cash, to declare dividends more regularly. This would be a shift from its standard practice of returning money to shareholders through special dividends.

In the past eight years, Italtile, whose brands include CTM, Italtile Retail and TopT, has declared special dividends three times, Potgieter said. Shareholders had also put pressure on the company to reconsider its dividend policy.

“It is prudent for us to return some of the money to shareholders regularly,” he said.

Italtile’s dividend for the year ended June 30 rose by 27%, from 30c a share to 38c a share. The company also announced a special dividend of 30c a share. Potgieter said the change in the dividend policy and the special dividend would not affect the firm’s solvency and liquidity.

The move would not stifle Italtile’s growth aspirations either. The group plans to open up to 15 stores in the 2019 financial year, he said.

“We will have enough money for future growth. We have always been able to generate a lot of cash,” Potgieter said.

In the past financial year, Italtile’s net cash improved by 33%, from R511m to R679m. Net asset value per share increased from 402c to 486c. Its R3.7bn in property assets was made up of a retail (R2.9bn) and manufacturing portfolio (R800m). The property portfolio was completely ungeared.

Italtile increased headline earnings per share by 12%, from 85.1c a share to 95c a share.

The company increased capital expenditure from R334m to R669m. Potgieter, however, said the group was concerned about the 2% increase in system-wide retail store turnover.

“That part was disappointing,” he said.

Italtile is to focus on growing sales across its brands, accelerating growth in selected markets in the rest of Africa and improving working capital.

Italtile’s first-half results for the new financial year would be better than the comparable first half of the past year, Potgieter said.

njobenis@businesslive.co.za