Buco gives Iliad sales of R4,5 bn

Commenting on the past year‚ Iliad's chief executive Eugene Beneke said: "The strategy developed after reviewing Iliad's business in the midst of the macro financial crisis is now steadily unfolding‚ underscoring the company's evolution towards sustainable growth.

"Two of the most important strategic projects for 2012 were implementing the Buco brand in the general building materials division and installing the new ERP platform. Replacing numerous regional brands with one brand has exceeded our expectations. To date‚ we have invested about R50m in rolling out the Buco brand‚ including store refurbishments‚ and the buy-in from all stakeholders has been most encouraging.

"Marketing campaigns to entrench the Buco brand are planned for the new financial year. Migration to the new ERP platform is going well with 25% of our stores successfully converted and we are on track to complete the project by mid-2014. This is expected to provide economies of scale‚ improved business information and procurement benefits‚" said Beneke.

Turning to the results‚ he noted: "2012 was marked by improved performance in the key indicators for the Iliad group. Sales grew by 6.2% to R4.5bn‚ translating into profit before tax of R64m. This was mainly due to another strong performance by the inland region of the general building materials division. The costs of our key strategic initiatives are included in these results."

He said cost increases were kept below inflation and cash was satisfactorily managed in a growth environment. Gross margin improved to 26.9% and profits before tax restructuring costs‚ increased by 29.4% to R146m.

Net finance charges in 2012 were down by R2m and reflect the lowest finance charges cycle in recent years.

Profits pay dividends

The results enabled Iliad to declare a dividend of 20 cents per share‚ with a dividend cover of 2.3. Beneke explained that this level of cover was expected to normalise as the group's performance trends continued to improve.

The return to profitability resulted in a tax charge of R29.5m and an effective tax rate of 47%. The main contributor to the higher rate was impairment costs which accounted for 14.2%. Net asset value per share increased to 573.9 cents.

Beneke said that there had been an encouraging improvement in results from the coastal regions‚ particularly the Eastern Cape, while the Western Cape has shown the slowest recovery.

The specialised building materials division delivered an improved performance for the year with sales of just over R1.0bn. Although this division continues to feel the impact of down-trading in the finishing end of the market‚ the retail subdivision reversed the trend of recent years with another strong result from the ironmongery cluster.

In the wholesale subdivision‚ notable performances were recorded by the equipment hire and boards clusters‚ with improved prospects for the new financial year following industry consolidation. As an outflow of normal strategic portfolio review process‚ a decision has been made to dispose of the Thorpe Timber wholesale business.

Looking ahead‚ Beneke said Iliad would continue to review the portfolio‚ aiming for the optimal mix of products and services to meet and anticipate market demand. Although the challenging trading environment was expected to continue in the year ahead‚ the group's strong foundation should support continued growth into 2013. Any acceleration in the recovery in building plans passed would reinforce this growth‚ particularly in light of Iliad's ongoing focus on the expense base. Equally‚ continued focus on effective procurement would assist in maintaining gross margins.

"As the market returns to growth‚ Iliad is well placed to capitalise on business opportunities‚ drawing on the skills of seasoned entrepreneurs managing decentralised operations. We are confident that our long-term investments have paved the way for sustainable growth in the years ahead‚" Beneke added.