Bathroomware company Italtile, which owns CTM and U-Light, says it is well-positioned for further market share gains as Covid-19 disrupts imports and keeps consumers from shopping malls.

The group increased its interim dividend by more than a third after better-than-expected demand for home renovations during Covid-19, saying on Thursday it had benefited from its recent drive to revamp stores, a healthy stock position, as well as its online presence.

Italtile has a network of 203 stores, and targets lower-middle- to upper-end-income consumers. It said on Thursday that renovation and home-improvements have dominated market activity, while the construction of new homes or commercial buildings is subdued.

The low interest rates and decline in property prices encouraged new first-home buyers, it said, with a strong demand from young, female investors in the property market, a trend that was evidenced by the customers in its stores.

Turnover grew by 14% to R6.2bn and profit 42% to R1.02bn, with the group also focusing heavily on inventory management and the efficiency of its manufacturing operations.

Italtile CEO Jan Potgieter credited the result to the “extraordinary” response by management to volatile conditions, as well as the effect of the pandemic, which “has enforced time in the home and altered spending priorities”.

Bricks and mortar

Potgieter said Italtile also benefited from the nature of its stores, which are by-and-large standalone, even as many consumers stay away from crowded shopping centres.

The group has revamped stores to improve the shopping experience, said Potgieter, which he believed was paying off during Covid-19 as customers sought security from well-known brands.

Many customers still preferred to finalise transactions in brick-and-mortar stores, said Potgieter, and while online sales had grown about twice as fast as general retail sales, Italtile was further encouraged by the high traffic on its website. 

That implied that customers were using the website to do research decide on what they wanted, he said.

“We think there is still room to run in terms of growing market share,” he said.

Local factories

The group said it also benefited from its manufacturing capacity during Covid-19, with the industry facing “severe delays and dysfunctionality at national ports”.

Italtile was also affected, but gets about 80% of its product from local suppliers, including its own factories. The constraints at SA’s ports was unlikely to be resolved in the short term, Potgieter said, while shipping costs had also spiked.

Small Talk Daily’s Anthony Clark said Italtile’s results, overall were “excellent”, and it had been well-stocked as consumers rushed back into stores in the second half of 2020.

“They were in an enviable position of having product to sell and product to supply to trade buyers at good prices,” said Clark.

The group looked set to continue to benefit from having the majority of its products sourced locally, said Clark.

“With global shipping rates having soared, the cost of importing heavy, low-value products such as tiles and sanitaryware has become far less profitable for competitors and independent suppliers,” he said.

Italtile still intends to continue with its store rollout, having said it wanted to open 10-15 new stores in its 2021 year. 

Potgieter said on Thursday that the group had seen Covid-19-related delays, including regulatory approvals, and some of the store openings could be pushed back into the new financial year.

Italtile increased its interim dividend by 35% to 31c, a R410m payout, and expects a strong performance in its second half, though a deterioration in economic conditions or stricter lockdown measures could put this at risk.

In afternoon trade on Thursday, Italtile’s share was down 2.76% to R17.60, having risen 37.18% over the past 12 months.

Update: February 11 2021
This article has been updated with additional information and changes throughout


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