Italtile to proceed with expansion even as SA’s prospects deteriorate
Declining confidence in the building sector and the prospect of SA being downgraded to junk status is weighing on the owner of CTM
Bathroom-ware company Italtile, which owns CTM and U-Light, said on Thursday it was proceeding with expansion plans, even as it warned SA’s declining economic prospects were particularly tough on the building and construction sectors.
Trading profit rose 6% to R1.029bn in the company’s half year to end-December, but the company now expects growth in its second half to be less robust than expected.
Confidence in the residential building sector fell to its lowest in a decade in the third quarter of 2019, the group said, while the deterioration of the commercial projects market was also concerning.
“This decline is further evidence of investors deferring expenditure in light of general uncertainty,” the company said.
“It is anticipated that a wait-and-see approach will prevail until after the national budget is presented in late February, and pending any further potential sovereign credit rating downgrades which may follow,” the group said.
Italtile said on Thursday that it was proceeding with expansion plans and was planning to “aggressively” compete for market share, having invested in the range of products on offer as well as in-store presentation.
The group opened 10 stores during the period under review and revamped another 15. It expects to open another five to eight stores in the next six months.
“Notwithstanding the challenging external environment, management remains committed to optimising ... the opportunities within its control in the business to drive continued growth,” said Italtile CEO Jan Potgieter.
The group, which has a total network of 197 stores, reported that net cash declined 30% to R702m in the six months to end-December, with outflows during the period including R340m on capital expenditure, up 11% from the previous comparative period.