Retailer Italtile’s R3.5bn acquisition of manufacturer Ceramic Industries boosted its interim turnover by 36% to R2.8bn for the six months to end-December.

Its after-tax profit, however, grew just 8% to R534m, according to its results, released on Wednesday.

The Ceramic deal resulted in Italtile’s shares in issue increasing 28% to 1.3-billion. Following this dilution, headline earnings per share (HEPS) grew 5% to 48.6c. Italtile declared a 17c interim dividend, 6% higher than 16c in the matching period.

The tile and bathware retailer, whose brands include CTM, Italtile Retail and TopT ended the reporting period with 174 stores, up from 156 at the end of 2016.

Like-on-like retail store turnover for the period fell 3.9% compared to the prior corresponding period, with average selling price deflation estimated at 1%.

"One out of every two tiles, baths and toilets purchased in SA is made by Ceramic, hence this operation has significant strategic advantage for the group," the results statement said. The group said it was affected by a downturn of investment in property across both the public and private sectors due to subdued economic conditions and socio-political uncertainty during the period.

In the company’s target residential segment, new-build growth was limited, while in the renovations market, home owners continued to invest in their properties but at a reduced frequency and value of expenditure.

In response, the group sought to leverage opportunities for growth through "intensified implementation of retail excellence disciplines and trading innovations", and to improve its working capital position through enhanced inventory management and cost leadership.

Owing to price rivalries and lower margins, the group said its "unique business model served it well". This was in the form of a "high-profile, strategic brand portfolio extending across the income spectrum and continued investment in the shopping experience" which appealed to both traditional and new customers.

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