Iliad Africa to grow core Buco chain after reshuffle

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Iliad Africa supplies building materials and hardware to large-scale development and construction groups as well as the do-it-yourself trade. It hopes to open four new Buco stores this year. Photo: Supplied

Johannesburg - Building materials distributor Iliad Africa will focus on growing its Buco chain of hardware and building material stores as it wraps up its portfolio restructuring projects.

“As much as we will continue to consider potential acquisition, our primary focus for expansion will be the new stores roll-out,” chief executive Eugene Beneke said yesterday.

The hardware supplier caters to large-scale development and construction groups as well as do-it-yourself homeowners and operates through 74 stores nationally.

During the 12 months to December last year, Iliad Africa sold its underperforming ceramics stores and timber wholesale business. This reshuffling resulted in the group ending the year with net cash of R38.8 million, compared with a net overdraft of R76.9m in the previous year.

“Improvement on the balance sheet together with the good progress on our key strategic initiatives have positioned us very well – it gives us a good foundation to drive our growth agenda as we go forward,” Beneke said.

Iliad Africa recorded a loss of 4.8c a share for the full year, which included restructuring costs and a loss on disposable of business components. The company’s once-off charges were R14.7m for restructuring costs, a loss on disposable of business components of R15.2m and fair value adjustments on available-for-sale assets of R70.2m.

Revenue for the year lifted 4.1 percent to R4.2 billion.

Excluding the once-off costs, earnings before interest, tax, depreciation and amortisation (Ebitda) increased by 1.9 percent to R149m.

Beneke said the group was actively looking for potential retail space for the roll-out of about four Buco stores this year. “We are considering various feasibility and potential geographies as well.

“We are not going to use a broad brush approach. We go into various geographies and identify specific areas where we believe the market is not saturated,” he explained.

In the past 18 months, Iliad Africa has converted about 48 outlets of its previous regional brands into Buco brand stores nationally.

“In June 2013, we unveiled our new customer interface brand, which marked the completion of the launch of Buco stores in all regions across the country. This included the rebranding and significant revamps of most stores.”

This had helped the group to optimise marketing focus and spend as well as to provide a more consolidated offering to customers.

Beneke explained that the first six months of the company’s financial year had been challenging as it was undergoing restructuring, whereas the second half of the year represented some hope in regards to consumer spending.

“We have picked up some positive but gradual trading patterns in the second half of last year, but nothing exponential,” he said.

The inland subdivision recorded muted results with a 2 percent increase in revenue while the coastal division delivered a 3.4 percent revenue rise.

“Coastal regions, especially the Eastern Cape, benefited from a few new projects from both government and individual projects,” he explained.

Jean Pierre Verster of 36One Asset Management said sales and Ebitda growth was muted, even excluding costs associated with the restructuring that the company went through in the first half of the year.

“Notwithstanding that they have done a lot to reposition their portfolio and to re-brand their general building material stores to Buco (in order to have a more uniform look and use national advertising to enhance their brand), it has still been a very tough year.”

Verster said the passing of building plans had slowed down as consumer spending remained muted.

“If you look at Iliad’s core customers, which are the ‘bakkie’ builders who do renovations and alterations, they are still under pressure because of the lack of consumer discretionary spending, including spending on alterations and renovations.”

Verster said that in the past consumers had used the access facilities of their home loans for renovations but in the past few years banks had limited this access. Concerns included increased competition in the building materials retail space, with Massbuild being aggressive in its expansion.

Iliad Africa shares closed just 1c up at R6.71 yesterday after earlier rising as high as R7. - Business Report


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