CTM’s marketing strategy has historically focused on recurring in-store promotions and discounting to accelerate sales, which resulted in staffing pressures and resource intensive planning during the height of these promotions, as well as high cyclical sales. The introduction of the in-house brands represents a new marketing strategy which will result in more predictable sales volumes year round, allowing for increased accuracy in planning and higher quality customer service. Although the change in marketing, which is driving new consumer buying patterns, dampened CTM’s sales volumes in the second half of the year, the Group is confident that its investment in these new brands will yield significant long-term benefits.

In line with the Group’s commitment to customer service as well as developing its people, CTM focused heavily on training to increase the competencies of its staff. The number of employees who were trained during 2009 increased by a multiple of 3,5 times the 2008 attendance as the brand took advantage of the lower foot traffic in its stores to upskill its people. With their improved understanding and knowledge, CTM’s sales people have become more energised and equipped with the knowledge to provide high quality interactions with customers on the shop floor.

Looking forward, CTM will continue to invest in its in-house brands to promote its value proposition with customers. In addition, it will focus on motivating and energising its staff to capture the improvements in customer service which are well within its reach.

In order to focus on its larger Group-owned stores, the Group will pursue opportunities to franchise smaller company owned stores in 2010.

TopT

TopT, which fits in strategically below CTM, targets the developing rural towns and smaller markets. Having opened an additional four TopT stores during the year to bring the total to eight stores, the Group continued to explore the optimal business model for the fledgling brand.

International Tap Distributors

ITD made excellent inroads to improve its business during the year, emerging as a more efficient operation. These benefits were leveraged with its robotic warehouse and modular stacker tower which enabled increased accuracy of deliveries and lead times, with 67% of orders being delivered within 24 hours. The number of line items has increased and ITD has also improved its order fulfilment both within the Group and to external clients, with stock accuracy recording a level of 99%.

The focus in 2010 is to extend the product ranges which will deliver efficiency benefits in the warehouse.

Elf and Earlyworks

Elf and Earlyworks, which distribute laminated boards, cabinets and tools through CTM, concluded an agreement with three highly experienced new partners during the year and showed significant revenue growth. Operating margins also showed a substantial improvement as overheads were drastically reduced, inventories were cleared and the warehouse was relocated to Vereeniging. The business is now positioned to deliver on its inherent potential. It was rebranded as Cedar Point after year end.

Property

The Group’s property strategy is pivotal to supporting the growth of its brands. As each brand’s business evolves, its image adjusts and its trading philosophy becomes more refined. Being its own landlord, affords the Group the flexibility to modify its properties to reflect these changes.

With only a few regional gaps remaining in its portfolio, the Group is well placed to maintain its selective approach to finding the right properties. Having taken eight years to acquire its existing portfolio of 70 properties. The Group will remain prudent, taking its time to locate the remaining sites in those locations that have been earmarked to complete its portfolio. However, with approved funding to purchase properties, the Group is positioned to conclude a quick purchase should the opportunity arise.

Future priorities

Looking forward, the Group will continue to explore mechanisms to enhance its operating efficiencies. It will maintain the momentum of the training activities initiated in 2009, focusing on growing and mentoring its people to pass on knowledge from its long-standing team members.

Customer service remains the key, and in order to create the platform, the Group first had to ensure that the basics were in place by adjusting the operating model and optimising the stock turn and logistics. The next step is to make sure that the team on the shop floor is energised, is aware of the products which are in store, and understands them to actively sell them.

CTM will continue to develop and support its in-house ranges, driving sales with compelling merchandising in its store. There has been progress on this front during 2009, but there is a way to go and the Group will continue to improve the standards of in-store décor with additional imagery and displays to support and build its brands.

The Group is committed to driving these initiatives to capture the opportunities which the tile and bathware market presents in the long-term to drive value creation for shareholders.

Appreciation

The Italtile Group’s successes in the past year have been based on the team efforts of all those involved in our Group – all those who care about our brands.

Heartfelt thanks go to everyone who has enabled us to make progress during such a challenging time. We appreciate the hard work of the dedicated people who, to mention a few, are running our stores, are providing invaluable advice to our customers, are giving us insights into improving the way we do things – each has played an important role in building Italtile.