Johannesburg - Building material company Iliad Africa suffered heavy losses in the six months to June after the value realised from the sale of two businesses was lower than expected.
In addition, two underperforming stores in the Western Cape and KwaZulu-Natal were closed down in the period.
The Ceramics Cash & Carry and Ceramics businesses were sold in May and July, respectively. Timber Wholesale was sold with effect from August 1 after the Competition Commission approved the sale.
The hardware supplier caters for large-scale development and construction groups as well as do-it-yourself homeowners and operates in 76 stores nationally.
The company said it had been undergoing changes in its structure since last year in an effort to optimise its portfolio and focus on the core business.
“The losses are directly related to the adjustment of the portfolio,” chief executive Eugene Beneke said, but he would not elaborate on why the companies were valued lower.
The cost associated with the sale of the two businesses after they had been assessed was a R70.2 million fair value adjustment and a loss on disposal of business components of R6m.
The costs from closing the two stores amounted to R14.7m.
Group revenue lifted by 0.4 percent to R2.2 billion in the period. For the six months to June, the company posted basic and diluted headline earnings a share of 0.4c, down from 20c.
The operating loss before finance costs was R53.5m, compared with a profit of R55.1m a year earlier.
Beneke said the reshuffling of the portfolio left a rather healthy business that was well positioned to capitalise on opportunities as growth gradually returned to the market.
“The business environment is challenging, but we are left with a healthier portfolio that we believe will provide us with the desired results,” he said.
He said consumer confidence levels had been subdued for a while, especially following tougher approval measures in the unsecured lending sector.
“The rural market was impacted by developments in [the] unsecured lending environment,” Beneke said, adding that this restricted their access to money and their ability to spend on refurbishments.
Despite this, two new Buco stores would be located in rural areas in Mpumalanga.
Beneke said Iliad was not “hugely exposed” to the lower end of the market and that the company wanted to position itself between the higher and lower spectrum of the market. He said he was confident that money would flow back into the lower end of the market.
Gryphon Asset Management analyst Reuben Beelders said there were not enough buyers in the building industry as consumers were spending less on discretionary goods.
He said food retailers such as Shoprite had said trading conditions were the worst ever, and he expected Iliad and its peers to do worse as building equipment was not a necessity.
Beelders said there was nothing to suggest the industry would be resurrected soon.
Iliad shares shed 0.91 percent to R4.36 yesterday. - Business Report