Italtile announces special dividend in a very tough market, share price surges

In a notable display of resilience amidst challenging market conditions, Italtile has declared a special dividend of 98 cents per share for the financial year ending June, showcasing its strong cash reserves that exceed operational requirements.

This dividend marks a significant increase from the 78 cents special dividend declared in the previous year and accompanies an ordinary dividend of 50 cents, inching up from 49 cents last year. Collectively, the special and final dividend amounts to 148 cents, reflecting a 16.7% increase from 127 cents per share in the preceding year. Following the announcement, the share price surged by 5.7%, reaching R10.99 on the JSE on Monday morning.

Lance Foxcroft, CEO of Italtile, who was interviewed by BR, attributed this positive performance to a steadfast focus on customer experience, which has enabled the company to achieve volume growth in retail tile sales while increasing its market share despite tough trading conditions.

“Customers remain loyal to our trusted brands, searching out value through big savings, reliable quality, leading fashion, and customer service when choosing where to spend their hard-earned savings,” Foxcroft said.

Interestingly, the special dividend comes at a time when Foxcroft forecasts continued challenges in the manufacturing and consumer spending landscape for the new financial year. However, their forecasting models indicate a robust cash generation ability moving forward, coinciding with the company’s current consolidation phase and the growth of organic opportunities.

Foxcroft expressed confidence that they are well positioned to capitalise on opportunities when the building sector eventually recovers. He noted how the company responded swiftly in the first quarter, when two-pot pension payouts and better overall sentiment positively impacted their markets, indicating readiness for any ensuing recovery.

Nevertheless, the global tile manufacturing sector faces significant pressure due to overcapacity and subdued demand, leading many manufacturers to seek alternative markets. The imposition of tariffs has exacerbated the situation, affecting Italtile's export opportunities amid heightened competition from neighbouring countries.

In response to these challenges, Italtile has applied for tariffs through the International Trade Administration Commission (Itac) of South Africa, although the process was taking time.

Amidst these hurdles, Italtile’s domestic performance reflects a complex mix of resilience and volatility. The group’s system-wide turnover dipped 2% to R11.3 billion, influenced by a modest increase in retail revenue countered by declines in supply chain sectors and Ceramic Industries.

Retail sales managed to rise by 1% year-on-year, maintaining market share despite price-sensitive consumer behaviour driving a decrease in average basket sizes.

The East African operations recorded a commendable performance bolstered by a stronger regional economy and strategic enhancements, while the webstore exhibited strong growth driven by improved digital offerings. The challenges faced by the sanitaryware division due to inferior-quality imports were somewhat mitigated by the robust sales growth of Betta Sanitaryware.

Foxcroft reiterated their commitment to capitalise on future opportunities, emphasising a focus on controllable factors within business operations to thrive amidst adversity.

“Organic growth will continue to be driven by capitalising on our leading brand positions in South Africa and our growing brand strength in East Africa,” he stated, alluding to plans for opening new TopT stores in response to changing consumer preferences.