Tiles and sanitary ware company Italtile (ITE) on Wednesday reported a 22% rise in diluted headline earnings per share to 21.3 cents for the six months ended December 2011 from 17.5 cents a year ago.

An interim dividend of 7 cents per share was declared.

Like-on-like system-wide turnover increased 16% to R1.84 billion, while revenue from group-owned stores grew 23% to R946 million and franchised stores increased turnover by 10% to R898 million.

The company said real organic growth equates to 15% given price inflation of 1% and no net increase in the total store number. Reported trading profit grew 17% to R271 million.

The Group's strong cash generating ability is reflected in the increase in reserves to R904 million from R820 million in 2010.

Describing the results as “solid”, Chief Financial Officer Peter Swatton said: “These results are attributable to continued improvements made in the business and the strong equity which the Group's brands enjoy amongst consumers. They are also a reflection of growth opportunities which exist in the market for discerning retailers.”

The group gained market share across its brand portfolio, comprising Italtile Retail, CTM and TopT, he added.

Swatton added that key to the growth was and an improved product matrix and rationalised ranges across the brands which enhanced customer service.

There was a 24% increase in sales in the bathware component, consistent with management's stated strategy to grow this segment's contribution in line with revenue contribution from tiles.

He added there had been a measured tactic to ensure stores were abundantly stocked to meet customers' expectations of range and product.

“The Group's strong balance sheet supported this and achieved significant competitive advantage in a market place featuring fragmentation and inconsistency of supply,” he said.

There was also a deliberate strategy to entrench Italtile as the price and range leader, by absorbing input cost increases, and adopting an aggressive pricing strategy, wherever possible passing savings onto consumers. The Group increased its imported stock volumes and range substantially based on strong demand from price-sensitive consumers seeking diversity from local product.

There was also rigorous cost containment and improved in-store and supply chain efficiencies which ensured that margin pressure was restricted, reflecting a nominal decline of 1% in total margins.

Swatton noted continued success in pioneering new product categories and ranges. Notably, imported tile sales grew by 38% against the prior comparative period whilst local tile sales increased only 3%. This is a function of importing product to meet demand for large format glazed porcelain patterned tiles which are not manufactured in this country.

“Despite indications that the economic environment is likely to remain restrained over the forthcoming six months, the Group is satisfied that growth is sustainable. This outlook is based on management's conviction that the market continues to afford expansion opportunities to determined retailers,” Swatton concluded.

Key focus would remain on improving the in-store shopping experience through enhanced innovation and service, intensified cost containment and inventory and range management, he added. - I-Net Bridge