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Chief Executive Eugene Beneke says the group is repositioning itself for future growth and as part of this process it was realigning a portion of its portfolio. In line with this and the trading statement issued from the premises, Iliad Africa Ltd recorded an earnings loss of 212,2 cents per share for six months ending 30 June 2011 (30 June 2010: earnings of 15,1 cents per share).

This includes once-off portfolio adjustment costs of R68 million and a R250 million impairment of intangible assets, mainly relating to Iliad’s Campwell Hardware and Thorpe Timber businesses.

Iliad focuses on sourcing, distributing, wholesaling and retailing general and specialized building materials for a range of customers, from large-scale contractors to do-it-yourself homeowners, through 103 stores countrywide.

Beneke continues, saying, “Compounded by a significant slowdown in the building and construction industry, underperforming branches were rationalized during the period and certain businesses put up for sale.” Both the Specialised Q Lite and SDT businesses have been put up for sale. He believes this realignment, representing less than 5% of turnover, will strengthen the group’s national portfolio by concentrating financial and human resources in profitable clusters, and reduce the expense base by around 8%.

Excluding these once-off costs, the group recorded an operating profit of R11,5 million for the interim period, against R35,2 million in the first half of 2010.

Turnover increased by 4,6%, mainly due to the strong performance of the inland regions of Iliad’s general building materials division. Beneke says results from other parts of the group reflects the continued subdued trading environment, marginal recovery in building plans passed and protracted slowdown in the finishing end of the industry.

Year-on-year expenses (excluding once-off portfolio adjustment costs and intangible asset impairments) increased by 7%, amongst others,   due to costs associated with strategic initiatives, while the decline in gross margin reflects an intensely competitive trading environment.

Iliad finished the half year with an overdraft of R55 million, compared to cash of R16 million at 30 June 2010. “The reduction is mainly due to paying for the DOH business, investing in working capital and once-off costs associated with the portfolio adjustment,” notes Beneke. In line with group policy, no interim distribution was declared.

In repositioning itself for sustainable future growth, Beneke says Iliad is introducing key strategic initiatives including an overarching brand in its General Building Material (GBM) division and consolidating the group’s enterprise resource planning platform.

Commenting on market conditions, Beneke says the past two years have been a challenging period for the building material supply industry. “Iliad’s ongoing focus on procurement, improving cost structures and operating efficiencies has countered these conditions to some extent. The residential market slowed further during the period, with building plans passed only now beginning to recover from the low base of 2009. The non-residential market and market for additions and alterations continue to reflect adverse macro-economic circumstances, perhaps best illustrated by ongoing and intensified downgrading in the finishing end as consumers search for value against constrained disposable income.”

Beneke believes the building materials industry is adjusting to new trading conditions after the unsustainable levels of 2004 to 2011. “The infrastructural efficiencies implemented during the period, stringent performance targets, realignment of the portfolio and implementation of strategic initiatives position the group well to capitalize on opportunities when growth returns to the market. Coupled with a streamlined and profitable portfolio and a two-year business improvement project, Iliad is well positioned for sustainable growth and strategic expansion.”