The environment we operate in
The general context in which we operate impacts on our ability to achieve our strategic goal to create sustainable value for all stakeholders.
This report discusses the emerging as well as existing trends which prevail in our industry and market, the effect they have on our business, and our strategic response – which is aimed at mitigating or managing any negative impact, and wherever possible, capitalising on opportunities presented.
Supply chain disruptions and shipping constraints caused delivery and pricing volatility in the first three quarters of the year, impacting on sales. This eased slightly in the fourth quarter, however, shipping costs are higher than pre-pandemic levels and shipping remains disrupted.
China’s zero-Covid policy may continue to impose strain on supply chains.
We derived significant benefit from our integrated supply chain, with 75% of total procurement sourced from local manufacturers and suppliers. Where possible, local supply alternatives to imports were sought.
Our integrated manufacturing capability served to offset volatility of the supply and pricing of imported product and the elevated demand for local stock.
Our import businesses made significant investment in business-critical and in-demand imported products to ensure customer demand was met.
Our omni-channel offering affords customers the opportunity to interact with us on the platform of their choice. Sustained investment and innovation ensured that our various platforms continued to improve the customer experience and achieve growth in online research and sales during the review period.
Refer to the E-commerce and IT reports
Our year-round value offering appeals across the income and demographic spectrum. Ensuring affordability for our customers is achieved through a range of mechanisms, including:
- local manufacture;
- effective management of internal costs;
- price laddering and product mix; and
- promotional activities.
Competitive activity has intensified in the retail sector of our industry, evidenced by the proliferation of smaller independent retailers in both urban and rural locations, while general building material wholesalers and merchants have also expanded their offerings. This competitive landscape could bring pressure to bear on margins, as traders seek to gain market share.
In the manufacturing sector, competitors continue to build new factories across the world, including in our neighbouring Southern African Development Community (“SADC”) countries. Local competitors also continue to expand capacity and improve their capabilities.
The Group has traded for five decades in a variety of conditions and has a strong, consistent track record of delivery. Our consistent focus on ensuring we have the most relevant range, exclusive latest fashion, affordable pricing and inspirational displays have made our brands the chosen destination for customers. We continue to focus on differentiating ourselves based on this customer experience. We will continue to place our attention and efforts on the factors within our control and influence.
Ceramic Industries continues to invest in the latest proven technology to stay ahead of the market, both in demand and in type of product. Our investment and experience enable us to implement these technologies at the lowest cost and ensure our offering to the market is first choice for our customers.
Unrest and flooding devastated the KZN province, which will take time to recover.
Civil action on transport routes and social unrest in communities continues to impact on trading.
Higher crime levels, including illegal activities by organised criminals on building sites, drove up security costs.
We have an unwavering focus on the growth levers within our business including intense cost controls and improving efficiencies and productivity to drive profitability.
Support for our teams and the safety of our customers are paramount. Our flat management structure and hands-on philosophy enable us to remain abreast of developments in the communities in which we operate.
In the context of negative consumer sentiment, our goal is to deliver an unparalleled shopping experience and ensure we are well positioned and agile to make the most of any market conditions.
The long-term dynamics of the housing market remain positive including:
- a prevailing housing shortage;
- favourable demographics (large growing young population); and
- increasing urbanisation.
Access to omni-channel shopping options and seamless transition between online and physical stores is key to consumers.
Time-pressed shoppers demand faster, more efficient in-store service.
We invest in a combined and consistent bricks-and-clicks trading format and technology which improves the customer shopping experience both in-store and online.
We continue to roll out physical stores to underserviced markets – with good success. We also continue to explore flexible store-size formats relevant to specific markets for all our brands. Our online offering is centred on providing consumers with a seamless, personal digital experience.
We recognise that improved access to technology creates opportunities for new customers to access our offering on new platforms. All of our retail brands are supported by interactive webstores.
We are building the momentum of our pre-retailing offering, which empowers customers to research and inform themselves prior to them needing to engage with a salesperson.
Continuous investment in technology across our operations enables us to deliver a cutting-edge offering. Our factories utilise state-of-the-art technology which enables manufacture of up-to-the-minute designs.
In terms of the online offering, our analysis confirms that more customers made use of our webstores’ industry-leading, cutting-edge augmented reality and visualiser functions.
Our training and development spend is significant and aimed at building a deep resource pool of appropriately skilled personnel.
We implemented outcomes-based training programmes during the period, which have started to enhance the expertise of our teams and align them better with our high-performance culture.
Our partnership and reward initiatives are designed to incentivise our people and position the Group as an employer of choice.
Refer to the Human Resources report
The global shortage of gas and escalating fuel prices continue to drive up costs of imported raw materials and finished products, specifically items sourced from Europe.
Additionally, the inflationary impact of this trend on general living costs places consumers under financial pressure, reducing their disposal income and affecting affordability.
The Group’s vertically integrated supply chain and procurement of 75% of all merchandise locally counters the increased cost of imported finished goods. Local procurement could be expanded through Ceramic’s international-standard import-substitute product offering.
The Group’s manufacturing plants are among the most energy efficient in the world, and Ceramic continues to invest in its renewable energy programme and investigate alternative energy sources.
Long-standing industry experience and sustained investment in cutting-edge technology enables the Group to deliver a fashionable affordable offering to customers.
Increasingly, shareholders identify ESG credentials as having an impact on their decision to invest in companies.
ESG awareness continues to grow among consumers who prefer to associate with brands that have admirable reputations and align their words with actions.
Customers expect brands to actively contribute toward the betterment of society as a whole.
Our actions around ESG will become an increasingly important driver of consumer choice and loyalty. We continue to advance our journey to improve the Group’s current ESG credentials as well as the disclosure of developments in this regard.
Environment
The Group employs a dedicated Citizenship Manager who is tasked with reviewing and reducing the Group’s carbon footprint on an ongoing basis. Across our operations, we strive to reduce consumption of non-renewable resources and, where possible, increase generation of renewable resources.
Our factories at Ceramic Industries use the latest technology to ensure efficient production, and rank among the most energy efficient in the world. Rehabilitation of raw material quarries is conducted concurrently during use and once end-of-productive life is reached.
We continue to expand our environmentally friendly product ranges across both our locally manufactured and imported merchandise.
An expansive renewable energy (solar) programme is in the process of being rolled out to our stores, factories and other Group sites.
Refer to the Environmental report
Social impact
We continue to strive to ensure that our community social initiatives are meaningful and sustainable and we will measure their impact on an ongoing basis.
Our Proudly South African campaign in our stores prioritises selling local products manufactured by local people.
We will strive to maintain our B-BBEE level 2 status through ongoing initiatives to transform the demographic profile of the business.
Governance
Our priority is to continue to entrench the implementation of good corporate governance principles across all of the Group’s business units.
Refer to the Corporate Governance report
