Our challenge is to provide a shopping experience that is aesthetically
pleasing, managed by knowledgeable sales consultants and offers a matchless
value proposition.
  Annual Report 2010  
Chairman’s statement
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Overview

This past year has been very tough, with a number of industry participants fighting for survival. Consumer disposable income remained constrained, and facing reduced demand, retailers were forced to engage in price cutting and de-stocking practices. In this context several players closed their businesses.

The aggressively competitive market provided homeowners with a wide range of offerings to choose from and in line with growing trends, buyers conducted extensive research before making their purchases. The Group’s comprehensive offering comprising superior value, style and service stood it in good stead in this environment.

Results

Despite the testing trading conditions, Italtile improved its performance on the previous year. In 2009 when the market deteriorated dramatically, the Group turned its focus inwards on its systems and service. The efficiencies introduced in the stores and the supply chain are reflected in these results.

The latter half of the year showed a small improvement on the first six months, as efficiencies started to filter through, assisting in firming margins. System-wide turnover improved 7% from R2,57 billion to R2,75 billion. Operating profit grew 8% from R361 million to R389 million. Cash and cash equivalents increased from R667 million to R711 million.

Operations

Having celebrated our 40th anniversary last year, the Group’s long-standing legacy provided comfort for customers seeking reputable, trustworthy suppliers in the uncertain economic climate.

Notwithstanding the competitive environment, the Group succeeded in gaining market share in the entry level and middle to upper-middle income market segments.

This improvement is attributable to our focus on the following three priority areas:

  • People
  • Supply chain
  • Customer service

People  

Our people ethos centres on nurturing entrepreneurship. We are continually striving to build a team of people who make a difference.

In order for us to grow our business and continue to meet the demands of our customers, we need to focus on developing and mentoring this resource. Service expectations continue to rise and the challenge for our staff and store operators is to deliver an unparalleled shopping experience that meets these exacting standards.

In this regard, our Tiling and Plumbing Academy which was launched in November 2009 has raised the benchmark in product knowledge training. I am pleased to report that over 180 candidates have graduated since the Academy’s inception, thereby furthering our commitment to continually improving customer service.

An extensive range of management programmes is now also in place to improve the calibre of store operators and develop the depth of leadership talent in the Group.

Supply chain  

Significant emphasis was placed on extracting further efficiencies out of the supply chain.

Ceramic Industries

Our long-standing relationship with Ceramic Industries continued to serve us well. Their competitively priced, high quality fashionable range ensured we were able to maintain our leadership in key market segments.

Following a three month period of industrial action at Ceramic Industries, supply returned to normal in February 2010. During the reporting period considerable improvements were made to the sanitaryware ranges, which will position the CTM stores to gain greater market share in the sector.

Cedar Point

Cedar Point’s ELF laminate board offering made substantial inroads during the period. As awareness of the product grows, the potential to expand this business increases. I have no doubt that brand building promotions scheduled throughout the year will boost the contribution this division makes to our Group.

The Group’s partners in this business delivered a commendable performance. Under their strong management, Cedar Point continued to show improvements and succeeded in growing market share. Their intensified focus on better buying secured competitive prices and an attractive new range, while prudent inventory management reduced slow-moving stock. The business also benefited from improved logistics and greater attentiveness to customer service.

International Tap Distributors (ITD)

Whilst ITD’s results improved and market share was gained, this performance is not indicative of the true potential of this business. During the review period, further efficiencies were achieved in the robotic warehouse and innovations in packaging and merchandising assisted in growing sales. However, further work requires to be done in this division, including improving the quality and volume of stock and intensifying inventory management.

Customer service  

Central to the customer’s perception of service is the shopping experience. With a vast range of offerings available in the market, increasingly discerning customers are seeking a comprehensive offering that combines value, style, convenience and excellent service. In this regard our challenge is to provide a shopping experience that is aesthetically pleasing, managed by knowledgeable sales consultants and offering an overall matchless value proposition.

Our in-house brand building campaigns, namely Kilimanjaro, Studio Ceramico, ELF and Tivoli, have gone a long way to establishing our stores as destinations. Our efforts to stock a comprehensive range of tiles, bathware, laminate flooring and tools holds appeal for consumers who seek a ‘Home-Centre’ shopping experience that affords access to all their requirements to improve their homes. Increasingly our CTM stores are viewed as one-stop solutions with a range of reputable brands under one roof, eliminating the need for homeowners to shop around and consult a range of individual suppliers.

Italtile

This brand gained new ground in the projects sector and the upper end of the middle income market, however the absence of growth in the premium end segment negatively impacted sales and margins. Italtile’s growth opportunities will be advanced by upgrading the in-store experience and extending inroads made in new market segments.

CTM

As mentioned, the market remained very aggressive over the review period, with a number of smaller competitors closing their businesses. In this volatile environment, CTM entrenched its leadership and gained market share, but we are cognisant that further work needs to be done to sustain this position. Vigorous attention will be paid to the imported product segment where opportunities to grow market share exist.

 
     
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