Financial results

Interim Results
For the six months ended 31 December 2007

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Commentary | Turnover analysis | Income statements | Segmental reporting | Balance sheets 
Statement of changes in equity | Cash flow statement | Notes



Italtile Limited reported acceptable results for the six months ended 31 December 2007. An industry wide downturn in demand during the traditionally heightened trading months of November and December 2007 dampened the group’s performance.

Italtile Limited reported a 7% increase in system wide turnover to R1 416 billion (2006: R1 324 billion), showing 6% real growth from its existing store network as price inflation was contained to less than 1% in an endeavour to offer value to customers who remain spoilt for choice due to the proliferation of new competitors in the market.

Trading profit, which increased by 12% to R208 million (2006: R185 million), reflects the benefits of the group’s ongoing focus on efficiencies.

The group reported earnings per share growth of 13% to 17,8 cents (2006: 15,8 cents) with headline earnings per share increasing by 11% to 17,5 cents (2006: 15,8 cents).

Inventory increased by R98 million to R322 million in the last six months, largely as a consequence of increased volumes in the supply chain. These were purchased in anticipation of the traditional peak trading period which failed to materialise.

The group’s cash reserves decreased by R41 million to R217 million (2006: R95 million), largely due to the increased inventories as well as investments of R69 million in fixed assets as showrooms and properties were upgraded in line with the group imperative to deliver quality customer service. The board approved borrowings of R100 million to fund properties in order to release working capital to fund operations.

Trading environment

While trading from stores in exclusively black residential areas was buoyed by high volume, spending from middle income earners in the group’s traditional stores has come under some pressure.

Operational review

As a result of the group’s substantial investments to upgrade and relocate stores, resulting in significantly expanded average trading areas, and the transient migration from franchises to group owned stores, Italtile embarked on several initiatives to consolidate its dominant position in the South African market. These will also ensure the resilience and sustainability of the business model in a tougher local economic environment which seems increasingly likely:

  • A systematic approach has been adopted to formalise and enhance back office and retail floor structures to manage the larger stock holdings and support decision-making;
  • Future talent is being nurtured and given formal training to enhance the group’s strategy to refranchise the 14 stores which are currently owned; and
  • Master franchises have been introduced to reward the best performing managers and offer mentorship to emerging leaders.

The group’s operations in Africa continue to trade, albeit at a marginal level due to regional unrest.

During the period, progress was made with the Australian operations which remain profitable.

Property portfolio

The group has maintained its conservative stance with regard to investments in its property portfolio, which increased, in carrying value, by R32 million to R617 million.

During the six months ended 31 December 2007, the group’s property portfolio continued to deliver returns which were in line with those of its trading operations.

Black Economic Empowerment

Shareholders are referred to the announcement dated 12 July 2007 and are advised that section 38(2A) of the Companies Act came into effect on 14 December 2007. Accordingly, the BEE transaction will be effective as soon as the remaining administrative conditions and requirements have been finalised.


The group welcomes Messrs Giuseppe Zannoni and Gary Morolo who were appointed to the board of Italtile with effect from 1 December 2007. Mr John Couzis resigned as a non-executive director of Italtile with effect from 1 December 2007.

The board thanks Mr Couzis for his valuable contribution during the years of his involvement with the Italtile Group.


The group expects demand to continue slowing as a result of the present uncertainty in the South African economy. While projections in the current environment are difficult, the board anticipates a lower rate of revenue growth for the full year.

Basis of preparation

The interim financial statements have been prepared in accordance with the listing requirements of the JSE Limited, the South African Companies Act, 1973 and International Financial Reporting Standards (IAS 34 – Interim Financial Reporting). The accounting policies applied have been consistent with those of the previous year ended 30 June 2007.


The group has increased the dividend cover to 4 times, due to the prevailing uncertainty in the operating environment.

The board has declared an interim dividend of 4 cents per share (2006: 5,2 cents), a decrease of 23%.

Dividend announcement

The Board has declared an interim dividend (number 83) of 4 cents per share to all shareholders recorded in the books of Italtile Limited. The last day to trade cum the dividend will be Friday, 29 February 2008. The shares of Italtile Limited will commence trading ex dividend from the commencement of business on Monday, 3 March 2008 and the record date will be Friday, 7 March 2008. Payment will be made on Monday, 10 March 2008.

Share certificates may not be rematerialised or dematerialised between Monday, 3 March 2008 and Friday, 7 March 2008, both days inclusive.


For and on behalf of the Board

G P E Ravazzotti
Chief Executive Officer


P D Swatton
Chief Financial Officer

13 February 2008

Registered Office: The Italtile Building, cnr William Nicol Drive and Peter Place, Bryanston (PO Box 1689, Randburg 2125)

Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107)

Directors: G A M Ravazzotti (Chairman), G P E Ravazzotti (Chief Executive Officer), *P D Swatton (Chief Financial Officer).

Non-executive Directors: S I Gama, G Morolo, D H Rabin, **G Zannoni. (*British ** Italian)