THE SPECIALISED BUILDING MATERIALS DIVISION (SBM) ACCOUNTS FOR 24% OF THE GROUP’S REVENUE.
THE RETAIL SUBDIVISION OPERATES OUT OF 25 OUTLETS AND TOGETHER WITH THE WHOLESALE SUBDIVISION, OPERATING FROM 18 OUTLETS, WE MARKET DIFFERENTIATED PRODUCTS, MANY OF WHICH ARE IMPORTED GOODS, TO LARGE-SCALE DEVELOPMENT AND CONSTRUCTION GROUPS THROUGH OUR COUNTRYWIDE NETWORK.
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SPECIALISED BUILDING MATERIALS
Specialised building materials division
The SBM division continued the turnaround noted at the half year, recording revenue growth of 3,5% for the year (2011: -5,6%). A return to trading profitability reflected contributions by both its Retail and Wholesale subdivisions. Despite operating in a tough market during the year, we believe this improved performance is sustainable on the back of management initiatives to strengthen business fundamentals.
The period was characterised by fluctuating consumer confidence, a slightly more accommodating approach to mortgage financing by banks and pressure on disposable income despite real wage increases. As a result, affordability remains an issue as both consumers and specifiers trade
down in selected finishes and customers continue to review their ordering patterns.
Iliad’s specialist ranges remain a reliable resource for architects and commercial specifiers, who benefit from the affordable solutions we offer.
Ongoing emphasis on skills development and training across the SBM division is proving its value in terms of empowering team members, and providing an opportunity for staff to network, share knowledge, capitalise on synergies and improve customer service. Managers are being developed through the Iliad Leadership Programme and the new Iliad Management Development Programme.
By restructuring the SBM division into Retail and Wholesale subdivisions two years ago, we have achieved our goal of improving customer focus and capitalising on intra-group synergies. Results for the year prove that strategic portfolio adjustments in the prior year, to drive efficiency and reduce cost, have positioned this division well for future growth.
In tandem with the strong focus on strategic planning to support growth and increased returns for our stakeholders, ongoing staff development ensures our
people are appropriately equipped to provide superior service levels in a competitive and price-sensitive market.
This subdivision houses Iliad’s Plumbing and Hardware, Timber Wholesale, Boards and Equipment Hire clusters. Revenue grew by 9,5% in 2012 (2011: 1,3%), reflecting good results from Equipment Hire but a disappointing performance from the Timber Wholesale business, despite an improvement in turnover compared to the prior year.
Trading trends continued to improve throughout the year, resulting in significant operating profit for the period compared to an operating loss in the prior year. Gross margin pressure in this subdivision reflects the competitive trading environment.
In the Plumbing and Hardware clusters, gross margins remained under pressure in a competitive market, negating single-digit revenue growth. Any recovery in the retail sector of the building materials supply industry will impact positively on this business in 2013, supported by the focus on inventory optimisation.
The Boards cluster delivered a commendable performance in a subdued industry segment, which faced significant pressure on margins amid continued high levels of competition. The cluster reported revenue growth of 7,9% and the benefits of rationalising and realigning the business were realised in 2012. This business is well positioned for further performance improvements in 2013.
Timber Wholesale operations again recorded a loss for the year despite achieving turnover growth in difficult trading conditions, which placed significant pressure on gross margins. As part of the strategic initiative to improve the balance of the Group portfolio, this business has been earmarked for disposal.
The Equipment Hire (B-One) cluster produced excellent results, successfully capitalising on opportunities in the various sales channels. This well-managed business is expected to continue generating a solid contribution to Group results.
Following a year of consolidation and strategic portfolio adjustments into two clusters – Ceramics (including Ceramics cash-and-carry) and Ironmongery – the Ironmongery cluster performed well in 2012 while losses in the Ceramics business were reduced, returning this subdivision to profitability
In the Ceramics cluster, the stores in our historical strength base, Gauteng, continued to improve their performance, with a major reduction in losses. Performance in the cash-and-carry business remains disappointing.
The relocated NTT Vereeniging store was opened at the end of November 2012, and the lease of the Strijdom Park branch was not renewed at year-end. Positive results are emerging from the 2011 rationalisation of stores in Durban, Bloemfontein and Cape Town.
The Ironmongery cluster delivered a solid result, recording double-digit growth in sales and operating profit for the year. Gross margins remained under pressure due to a competitive marketplace, with expenses well controlled in a cluster that is consistently a strong performer in the Group portfolio.