Sunday, January 16

Jan Potgieter’s Swan Song Results on Italtile Sparkle


Jan Potgieter and his team at Italtile posted stellar financial results on Thursday, with business volume across the group increasing 25% to R11.6 billion, Earnings per Share (Heps) up 77% to 140.1 cents and the Shareholders earned a final dividend of 25 cents per share (cps) and a special cash dividend of 50 cps for the year through the end of June 2021.

That’s quite a swan song for Potgieter, who presented his final set of results to the group as CEO. He will go very high after announcing earlier this year that he plans to retire and emigrate to Portugal at the end of the year.

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While the group has benefited significantly from the Covid-fueled home improvement boom, it has also been affected by the pandemic, with additional costs associated with disinfectants and personal protective equipment (PPE) for staff, as well as disruptions in trading when Covid cases occur. among the staff.

Read:

The group, which owns tile and sanitary ware retail chains Italtile, CTM and TopT along with vertically integrated manufacturing operations, reported double-digit sales growth across all business units for its final financial year.

Italtile is a relatively narrow JSE-listed company from a shareholder perspective, but its share price firmed just over 3% on Thursday as shareholders and the market recognized the strong performance.

It closed at R16.65 per share, valuing the group at more than R21.3 billion.

That’s around R9 billion more than retailer Massmart, which owns the DIY chain Builders Warehouse. By the way, Massmart is where Potgieter once worked as the CEO of Massdiscounters (the old unit that housed the Game and DionWired networks) during its heyday between 2007 and 2013.

“Italtile is grateful for the excellent results, underscoring that we were ready to seize the opportunities to emerge from the pandemic. It was a difficult year, but we were well positioned as a group, ”Potgieter tells Moneyweb.

“We were rewarded with double-digit growth in all business units. While the comparison to the previous year is a bit distorted due to the Covid lockdown in fiscal 2020, we still show double-digit growth compared to our financial year 2019, ”he notes.

He says the performance is a testament to the group’s agility in the face of Covid-19, as well as its “robust and integrated supply chain,” which was enhanced over the past year with significant additional investment.

Despite the continued impact of the pandemic on the economy, the group’s manufacturing operations (ceramics industries) and the store network registered an investment of more than 800 million rand, divided almost evenly during the financial year.

Read: Covid-19 Doesn’t Deter Italtile’s R800m Capex Plans

According to Potgieter, Italtile spends around R600 million on capital expenditures during a normal year. However, there were four major projects undertaken during the last 12 to 18 months, such as the group’s new Samca ceramic tile factory in Gauteng.

“This will be a game changer for us as we increase local production. The Samca factory is expected to go online in mid-September and features the latest technology, including a lower C02 emissions, ”he says.

“The factory will not only allow us to compete with imports, but it will give the group a greater advantage against global supply chain disruptions due to Covid-19. It will enhance Italtile’s vertically integrated business model. ”

On his pending departure, Potgieter says that while “it’s good to go well,” he always planned to retire after six to eight years in the group.

He will remain on Italtile’s board of directors as a non-executive director after his retirement, adding that the group is in good hands, with long-term succession planning.

Read: How should (and should not) do the succession

Lance Foxcroft, current CEO of the Ceramic Industries subsidiary, will take over as CEO of the group effective January 1, 2022.

Small Talk Daily Research independent analyst Anthony Clark says the market seemed pleased with Italtile’s results as the share price rose more than 3%.

“With net cash of R1.1 billion and given its strong cash generation [it] You can easily finance your R800 million equity investment program. There are many new growth paths for Ceramic Industries and Italtile both in the country and in Africa ”, he adds.

“The company gave a positive note that they are not seeing any slowdown in demand for their products and plan to further capitalize on investment made in key brands to continue to increase market share and percentage share of the home renovation wallet. of the consumer, “says Clark.

“The market is apparently losing its inherent strength and prospects within Italtile and at a PE of 11.9x [price-earnings ratio] rating and a 6.4% dividend yield… I don’t think the price is that extensive given the company’s expectations, ”he says.

“Yes, the group’s share price was up 3% after the results, but I think the market has completely underestimated Italtile’s top-of-the-line and mid-cap royalty status.”


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