“I think to some extent we were always accused of having a lazy cash balance sheet so we have taken the heat and are now looking forward to really working off our capital structure,” Brandon Wood, Chief Financial Officer, of Italtile told CNBC Africa on Wednesday.
The company, Italtile[DATA ITE:ITALTILE LTD.], which specialises in the sale of ceramic tiles, porcelain and bathroom furniture, declared a final dividend for the year ending 30 June 2013 of 8 cents per ordinary share as well as a special dividend of 50 cents per share payable to shareholders.
The special dividend is part of the group’s plan to optimally employ its capital structure however Wood has maintained that it will not be a regular aspect of the business.
“The special dividend is not unknown in our organisation but by no means are we setting a trend going forward,” he explained.
Wood added that a lot of value has come from shareholders investment therefore it was time to give back to them.
He also pointed out that Italtile were able to employ this strategy which issued a special dividend due to the company’s highly cash generative nature.
“The business is highly cash generative. We had out flows of 1.3 billion rand this year but still ended the year on a fairly solid cash balance which continues to grow,” said Wood.
The company’s priority, he pointed out, was to improve returns for the company’s shareholders as well as remove the complacencies that comes with a high cash balance.
Another key focus for Italtile was to greatly improve the efficiencies of the business such as their cost containments
The company’s success also lies in its goal of branching out into other parts of Africa, starting with Kenya.
“We recently opened the Nairobi store within this financial year and that has done pretty well. We believe there is potential in Africa. We also have land in Zambia and Uganda that could potentially be developed in future, said Wood.
However, like many other retailers establishing businesses in other regions of Africa, Italtile has experienced logistic issues.
“Moving stock is difficult particularly with our kinds of stock. The lead time to get products to Nairobi takes about 6 weeks. We have faced scenarios where stock sits at the port for 2-3 months,” added Wood.
He explained that this causes an impact on their retail operations where the store might be out of stock for long periods and then suddenly a rush of product come in.
“That in itself poses its own challenges in terms of managing the movement of that stock,” said Wood.
Italtile’s key region of focus however remains Southern Africa.
“We still think there's a lot of opportunity in South Africa and its neighbouring countries,” he concluded.