CTM

Overview and performance matrix
Nature of business	Leading specialist retailer of tiles, laminate boards, taps, sanitaryware, bathroom furniture and accessories.
Target market	Middle income DIY customers and small builders.
Number of stores	89 (81 in South and Southern Africa, and 8 in Australia).
Key performance indicators	Trends
Sales	↑ 16%
Average price inflation	↔
Margins	↓ 1%
Net profit	↑
Stock turn	↑
Key differentiators	Unrivalled buying power locally and internationally.   Year-round value offering.   Integrated supply chain ensuring consistent availability of stock.
Strategic positioning	Big savings. More style.

CTM delivered solid growth across its merchandise categories and continued to gain market share in the emerging middle class segment. Particularly strong growth was experienced in Limpopo, Mpumalanga and Gauteng, with improved performances in Botswana, Namibia, North West Province and the Free State. The coastal regions tended to lag their inland counterparts.

TILES: Tile sales volumes increased by 8% across CTM’s offering. Sales of imported tiles outstripped local tile sales, aligned with evolving demand for international products at competitive prices. The introduction by the Group of unique products such as large format glazed porcelain patterned tiles, not manufactured in this country, also served to grow the market in this category. Intense competition continued to be experienced in the entry-level product price range. Whilst most of CTM’s imported tiles were sourced from Eastern markets, instability in European economies also provided good buying opportunities. The implementation of cutting-edge ink-jet technology by local manufacturers has started to yield highly stylish, affordable products that compete favourably with imported ranges. Advancements in this regard coupled with anticipated further depreciation of the rand, will probably impact CTM’s local to imported tile ratio.

BATHWARE: CTM gained further market share in the bathware segment of the business, delivering growth of some 27%, predominantly due to improved ranges and the introduction of new products, as well as consistent availability of stock in the stores. Brassware and accessories sales grew in the order of 30%. A new, exclusive range of Hans Grohe taps was introduced and has proved popular, whilst CTM’s Tivoli tap range continued to gain brand equity, supported by a high profile TV campaign and in-store promotions.

The previously underperforming bathroom furniture segment recorded growth of 37% attributable to an extended range and improved availability of merchandise. Sales of sanitaryware grew 20%, benefiting from automated ordering and higher model-stock levels. An interesting trend witnessed during the period was the growth in demand for high-value colour products. This is a function of CTM’s increased penetration of emerging markets, and the brand is now regarded as a serious player in this niche colour sanitaryware and bath market.

LAMINATE FLOORING: The laminate board category remained keenly contested, featuring a proliferation of opportunistic suppliers and aggressive price positioning, resulting in intense margin pressure. Whilst these factors constrained the robust growth experienced in the prior year, CTM’s laminate board offering, Elf, continued to make inroads into new markets and has achieved success with ranges introduced specifically to meet emerging market tastes.

At the end of the prior year, management identified CTM’s primary challenges to include: improving the offering in collaboration with the supply chain; progress training initiatives and leadership development; and capitalise on opportunities to innovate and set new trends.

In this regard, a number of achievements can be reported on:

• Supported by a successful TV and tabloid campaign, CTM entrenched its ‘Big savings. More style’ positioning with a range of activities including store and signage revamps, improved layouts, and clearer pricing in-store.
• Extensive market research was conducted to better understand customer demands and resulted in rationalisation of the range matrix across the brand’s merchandise categories and the development of complete product ‘solutions’.
• CTM’s tile range was re-designed with greater focus on quality and flair. The introduction of ink-jet technology in tile manufacturing has significantly improved the stylishness of products.
• Introduction of a wide range of kitchen sinks has been well received. Based on this success, a range of CTM-exclusive products is being developed and will be launched in the first quarter of 2013.
• CTM’s policy of ‘The right stock at the right time’ affords the brand strong competitive advantage, and the implementation of an automated replenishment system which increased stock availability in the stores to support increased turnover has been extremely important in delivering on this proposition.
• In light of increased inventory volumes, warehouse efficiencies and stock movement have become a key focus area. Storage and logistical improvements have been implemented, which combined with new barcode scanning technology have resulted in improved inventory management, which in turn has made for a better customer shopping experience.
• Improved training has been central to CTM’s performance during the period. Employee competence levels have risen as a result of increased in-house supplier training, theoretical and practical training at the Group’s Tiling, Laminate and Plumbing Academy, and the introduction of a range of career development courses focused on mentorship, management and leadership. In the last quarter, the Group commenced a partnership with Stellenbosch University to conduct a range of Management Certificate courses for CTM candidates.

Priorities and prospects

Innovative product ranges will continue to be sourced across the merchandise categories. The introduction of new lines of accessories and taps is scheduled for the first quarter of 2013, whilst new ranges of European tiles and new-technology local tiles will be introduced on an ongoing basis to entrench the brand’s style offering and commitment to customers that CTM stands for the right of every South African to have a beautiful home.

Training will remain a priority, facilitated through in-house and external training programmes.

TopT

Overview and performance matrix
Nature of business	Retailer of tiles, laminate boards, taps, sanitaryware, hardware and accessories.
Target market	Entry-level value offering strategically situated in close proximity to under-serviced rural and outlying markets.
Number of stores	15
Key performance indicators	Trends
Sales	↑ 41%
Average price inflation	↔
Margins	↓ 1%
Net profit	↑
Stock turn	↔
Key differentiators	Flexible, opportunistic product range.   Availability of stock and accessibility to market.   Strong community relationships.
Strategic positioning	Your No. 1 store that saves you more.

The under-serviced rural and outlying markets continued to provide good growth opportunities for TopT. The brand’s primary strategy to offer accessibility to affordable products enabled it to gain momentum and grow market share across the product range. TopT reported solid organic growth of 25% for the period, although margins were constrained by extremely competitive trading conditions.

The business benefited from improved penetration of existing markets and extended its presence with the opening of five new stores in Zeerust, Pretoria West, Thembisa, Nelspruit and Witbank. Greater attention was paid to improving the shopping experience through an enhanced product range, an intensified focus on innovation and retail flair in-store, and increased skills and product training amongst staff. As a result of these initiatives, TopT’s market appeal was extended from its traditional entry-level consumers to include cost-conscious middle class bargain hunters.

Intensified market research and close community relationships resulted in an improved understanding of customer demands which fuelled sales growth, while highly specific community marketing campaigns continued to deliver strong benefits for the brand.

Priorities and prospects

TopT’s challenges in the forthcoming period will be to source suitable operators and sites for new stores. Key priorities will include increased control of overheads to support the brand’s lowest-cost value offering. Ongoing staff training will remain a core focus.

In the short term, roll-out of the store network will continue to be implemented on a regional basis in South Africa. Over the longer term, TopT’s suitability for expansion into the African market is an obvious consideration for the Group.