Iliad Africa Limited: Adapting to a challenging environment

Any company working within South Africa’s construction sector, be it contractor, subcontractor or supplier, has felt the effects of the economic downturn in recent years. Strategy has been at a premium as companies fought to survive or turnaround declining fortunes.

For companies like Iliad Africa Limited, the going has been tough. The business focuses on sourcing, distributing, wholesaling and retailing general and specialised building materials and became a JSE-Listed company in 1998.

Although the Group is a leading participant in a sector reported to be worth R59 billion, there have be no guarantees in recent years and the company has had to adapt and did so with the successful launch of its BUCO brand last year.

shutterstock_150465233Eugene Beneke, CEO of Iliad Africa commented, “The strategy developed after reviewing Iliad’s business in the midst of the financial crisis is now steadily unfolding, underscoring the Group’s evolution towards sustainable growth. Supported by meticulous planning and research, we have revitalised our General Building Materials (GBM) division by launching this unifying brand across all regions. We are thrilled with how well the new brand has been received.”

In March of last year, the company reported that it had successfully turned disappointment into improved trading figures thanks to a range of services and products available through its 92 stores at that time.

Sales were up 6.2 per cent to R4.493 million and the company attributed this to “Improved trading performance reflecting the benefit of a focused strategy; the launch of a single brand for General Building Materials division – BUCO – rolled out nationally to an excellent reception; and; Implementation of a consolidated Group ERP platform which is on schedule to be completed by 2014.” 

In a press release, Iliad stated:

“Commenting on the past year, CEO of Iliad, 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 approximately R50 million 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 per cent 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 per cent to R4.493 million, translating into profit before tax of R64 million. 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.” 

The Group’s divisions are run by a team of experienced entrepreneurs capitalising on common pools of expertise and focused on achieving divisional growth targets. The General Building Materials (GBM) department is responsible for marketing a range of products – which are mainly sourced locally, through its Inland and Coastal subdivisions, which largely fall under the aforementioned BUCO brand.

A separate Specialised Building Materials (SBM) division trades in differentiated and value-added products through its Retail and Wholesale subdivisions. 

As the company released its results last year, the GBM division came in for particular focus:

“The General Building Materials Division remains the hub of the business. The division reported a 7.1 per cent increase in revenue and again improved operating profit. Although this performance reflects solid results from the Inland regions, there has also been an encouraging improvement in results from the Coastal regions, particularly the Eastern Cape. While the Western Cape has shown the slowest recovery, it is well placed for a stronger performance in 2013.

shutterstock_158634467“The Specialised Building Materials Division delivered an improved performance for the year with sales revenue of R1.039 billion. 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 latter sector in 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.” 

The launch of BUCO was a significant step for Iliad, taking place in June 2013 amid celebratory scenes at a party where suppliers and strategic partners witnessed entertainment involving lazer shows, dancers, artists, live music and speed painters.  

“The event marked the completion of the launch of BUCO in all regions across the country. Significant revamps in most stores provided the platform to refresh merchandising and reposition the business to attract more of the growing DIY segment,” the company website states.

BUCO is Iliad Africa’s GBM division, which accounts for 76 per cent of the Group’s revenue. The GBM division has 49 stores nationwide and is made up of a Coastal and Inland subdivision. The Inland subdivision operates out of 30 stores and the Coastal subdivision operates from 19 stores currently.

The implementation of BUCO reflects the Group’s decision to replace its numerous regional brands to capitalise on the strength of a single identity while optimising marketing focus and spend, and providing a more consolidated offering to its customers. Iliad is reinforcing its strategy and commitment to meeting the product needs of the building industry, servicing a wide range of customers, from large-scale contractors to DIY enthusiasts nationwide. BUCO will provide consistency in customer experience as well as the opportunity for Iliad to build greater brand recognition and brand equity.

Commenting on the new brand, Eugene Beneke added, “The primary objective of this initiative was to provide a more consistent offering across our store network that could capitalise on focused marketing. We have invested approximately R50 million in rolling out the BUCO brand, including store refurbishments; and the buy-in from all stakeholders has been most encouraging.

“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 concluded.