Review of operations

For further information on the
TopT division please visit the website
www.topt.co.za

TopT report

Overview and performance matrix
Nature of business	Retailer of home-finishing products including tiles, paint, ceiling décor, taps, sanitaryware, hardware and accessories.
Target market	LSM 4 – (lower) 7 Entry-level value offering strategically situated in under-serviced rural areas and outlying markets in close proximity to urban townships.
Number of stores	35 Group-owned: 6 Franchised: 29
Key performance indicators	Trends 2015	Trends 2014
Sales
Average price inflation
Margins
Net profit
Stock turn
Key differentiators	Flexible, opportunistic home-finishing product range. Affordability and availability of stock and accessibility to market. Strong community relationships.
Strategic positioning	Every price a LOW price.

TopT reported good results for the period, growing turnover and profit and gaining market share in new and existing markets. In line with the brand’s strategic positioning – every price a LOW price – average price inflation was contained; intensified cost management served to mitigate the decline in margins. Despite increased levels of inventory to support strong sales growth, stock turn and general stock management improved.

In the previous report, the priorities outlined for the year ahead were: to roll out stores, focusing on optimum alignment between store and market; implement improvements in ranges, systems, processes and supplier relationships; and promote development of human capital.

In this regard, the business made good progress in attaining its goals:

Store roll-out

During the year under review, 11 new stores were opened, namely Pietermaritzburg, Mtubatuba and Ladysmith in KwaZulu-Natal; King William’s Town and Mthatha in the Eastern Cape; Mafikeng, Northam and Klerksdorp in North West; Ermelo and Bushbuckridge in Mpumalanga; and Taung in the Northern Cape.

Subsequent to year end, stores were opened in Queenstown in the Eastern Cape and Alberton and Germiston in Gauteng. TopT is now represented in seven provinces.

Operational improvements

Management’s core focus during the year was on the three main pillars of the business, namely customers, people (staff) and products. The following notable improvements were made:

Customers and staff

• Stores are deliberately located within close proximity to their markets, increasing convenience for customers and reducing transport costs, which continues to be viewed favourably.
• Store employees are sourced from the local community and have particular affinity with their customers, creating invaluable goodwill.
• Particular attention was paid to appointing and developing fit-for-purpose staff; in addition, the management team was restructured to facilitate the brand’s growth forecasts.

Store and products

TopT is differentiated from its peers (primarily independent, less formalised traders) by its positioning as a home improvement specialist, providing affordable complete product solutions to customers. The merchandise offering is unique in its niche market given the quality, size of range and continuous availability of core products.

During the period, improved execution of basic retail principles in-store was a key driver:

• A comprehensive range and price matrix restructuring was implemented across the merchandise categories to align better with specific markets;
• New ranges and categories continued to be introduced, including a private label tap range, Diva, adding to the brand’s other exclusive ranges, including Tuff paints and tile adhesives;
• Product ‘combos’ which offer complete merchandise solutions were promoted and continued to gain popularity; and
• The in-store shopping experience and customer service was improved with the introduction of new format, ease-of-use store layouts.

Communication

• TopT made good inroads into improving communication with customers by reviewing the mediums and frequency of its advertising and promotions. Improved analysis of data verified the strong sell-through ratio between product-specific promotions and the products on promotion.

Priorities and prospects

Over the past year TopT performed in line with management expectations, while simultaneously demonstrating the potential to expand this business. A range of opportunities has been identified to ensure that growth continues at the current pace:

• The Group’s Business Optimisation Programme (“BOP”) will be implemented in the year ahead. The goal of this strategic intervention is to further interrogate the business model to facilitate substantial operational improvements. This will include closer alignment with the Supply Chain (existing and new suppliers) aimed at improving stock and logistics management, thereby enhancing customer service; intensified cost management and improved execution of basic retail principles in-store.
• Improved analysis of data will afford the opportunity to improve the range and introduce new private label products and merchandise categories in line with customer desires. Management of product and price matrices will be a key focus in the forthcoming period.
• Across the business, training and human capital development will be prioritised in the year ahead in order to build a pipeline of fit-for-purpose personnel to support the brand’s planned growth. Given that many of TopT’s stores are situated in outlying areas, online training will be crafted specifically for their requirements. Underlying all training initiatives is the goal to enhance customer satisfaction, grow the skills base in the brand and incentivise employees through career development.
• Management’s intention is to continue to grow TopT’s retail footprint by between five and 10 stores annually. The following provinces will be targeted for expanding the network in the year ahead: Eastern Cape, Gauteng, Mpumalanga and Limpopo. Unlike the Group’s other retail brands, TopT trades out of rental properties; as such, the store roll-out programme will be constrained by availability of suitable sites.