Our opinion on the current state of ITLTILE(ITE)Italtile (ITE) is a franchisor of tiles, sanitary ware, flooring, and home finishing products, which it manufactures and wholesales itself. The company is controlled by the Ravazotti family. It has 206 stores and 6 online web stores. It also has a property portfolio of retail and industrial properties worth about R4,3bn. The company has acquired 95,47% of Ceramic Industries and 71,54% of Ezee Tile, which it styles as its manufacturing business (as opposed to its retail business).
The company gained an increased "share of wallet" and improved the management of stockholding and working capital. It appears to be benefiting from increased sales as people work from home and seek to improve their home environments. It plans to add between 10 and 15 new stores this year. It has also bought back about R240m worth of its own shares at lower levels. The company closed 18 stores in Natal and 16 other stores for 10 days during the civil unrest. Two stores at Orange Farm and Spruitview were destroyed. There have also been store closures due to COVID-19 during July 2021.
In its results for the six months to 31st December 2023, the company reported turnover down 2% and headline earnings per share (HEPS) down 15%. The company's net asset value (NAV) rose 10% to 684,4c per share. The company said, "Our retail stores are financially sound, underpinned by robust operating models. Encouragingly, the retail operation's results were creditable, given the high comparable base, fiercely competitive landscape and weak consumer demand. The Group's strong balance sheet and cash generative nature is evidenced by cash reserves of R1.5 billion (2022: R0.8 billion)."
In a trading statement for the year to 30th June 2024, the company estimated that HEPS would fall by between 4,7% and 10,3%. The company said, "Homeowner confidence remained subdued in light of sustained high interest rates and inflation, and demand was at low levels across the industry. In the context of low GDP growth and weak consumer sentiment and spend, the building cycle downturn has yet to recover."
Technically, the share moved sideways for two years until COVID-19 took it down to levels around R10. It has been moving sideways and downwards for a few months. The share broke up through its long-term downward trendline on 28th June 2024 at a price of 1107c, and it has since moved up to 1126c. It will probably benefit from new building activity expected to follow the formation of the new GNU in South Africa.
