Financial results

Reviewed Group Results
For the year ended 30 June 2008

Download the entire paid announcement 

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



The Group reported a 7% increase in system-wide turnover to R2,77 billion (2007: R2,58 billion). Price inflation was limited to 1,5%, reflecting real growth of 6% from the existing store network, as the Group consolidated its market advantages and held back on price increases to benefit consumers.

Reported trading profit increased by 2% to R399 million (2007: R393 million), which includes a once-off IFRS cost of R25 million associated with the IFRS 2 (Share based payments) expense of the transaction. Excluding the impact of this transaction reflects a normalised increase of 7,9% in trading profit. Increased financing costs of R14 million (2007: R2 million) resulted largely from property related borrowings.

During the second half of the financial year, the Group was successful in decreasing inventories by 19% to R263 million (31 December 2007: R322 million) despite slower market demand, which is in line with historic levels.

The Group’s cash reserves increased by R23 million to R281 million (2007: R258 million). The Group’s current ratio improved to 2,4 times (2007: 1,6 times) as the R73 million property borrowings released working capital to fund operations. During the period, direct property investments and store enhancements totalling R126 million were concluded as the Group continued to upgrade its stores.

The tangible net asset value per share has increased by 22% to 149 cents (2007: 122 cents).

Trading Environment

Pressure on consumers’ discretionary spending across all demographic segments, as a result of higher interest rates and rampant inflation, was evidenced in lower traffic across the Group’s store network. With decreased capacity to spend, customers’ buying decisions have become more conservative and focused on making quality purchases. This flight to quality plays to the Group’s strengths with its well established brands and service oriented culture.

Operational overview

Having identified a potential opportunity to supply the highly price-sensitive entry level market, the Group, launched a third brand, named Top T during the year. At 30 June 2008, four Groupowned stores had been established at Group sites which were previously vacated due to relocations. Top T, which fits in strategically below CTM, will target developing rural towns and smaller markets. The brand has good expansion prospects and leverages the Group’s extensive buying power.

In order to harness the full potential of the Italtile brand faster, the two top performing store operators who have proven track records with the Group were incentivised with equity in the national Italtile brand. The Group is confident that as shareholders, they will focus exclusively on growing the Italtile brand.

The Group maintained the momentum with initiatives to consolidate its dominant position in the South African market. Projects to enhance systems and controls in the pursuit of a superior customer experience and to further improve in-store service levels are delivering benefits, especially as the cyclical downturn plays itself out. The Group maintained its focus on training and mentorship to grow and develop a pool of future store leaders. In addition, its skills transfer initiatives, which include the Tiling Academy, have been attended by approximately 800 individuals since inception.

The Group increased its holding in International Tap Distribution (ITD) from 60% to 80% with effect from 2 July 2007.

The Group’s closer involvement resulting from the new partnership model in its fourteen sub-equatorial African stores is starting to yield results and the Group continues to evaluate opportunities.

The Group’s Australian operation, comprised of eight stores, once again made a positive contribution to Group results due to its more intimate understanding of regional consumer requirements and further refinement of its retail model.

Property Portfolio

The quality of the Group’s property portfolio was confirmed through a tri-annual valuation which disclosed a value of R1,1 billion, compared to its carrying value of R640 million at the end of June 2008.

The Group’s property portfolio maintained returns which were in line with those of its trading operations during the year under review.

The Group continues to evaluate development opportunities, especially given the current market where softening land prices have the potential to offer higher long term returns. With its capacity to fund property investments, the Group will look to take advantage of the current market to further strengthen its property portfolio.

Black Economic Empowerment

The Group’s BEE transaction became effective on 11 February 2008 as the remaining administrative conditions and requirements were fulfilled. The Group is now in a position to participate in new markets as a result of its BEE partnerships.


Despite trading conditions which are expected to remain difficult in the coming year, the Board anticipates that profitability will be maintained at current levels.

Sub-division of shares

On 6 November 2007 the Company altered its authorised and issued share capital by subdividing every share of no par value in the company’s authorised and issued share capital into 44 ordinary shares of no par value.

Basis of Preparation

The preliminary profit announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) and is prepared on the historical cost basis, adjusted for the fair value of certain assets and liabilities.


Based on operational progress during the second half of the financial year, the Group has reverted to the historic dividend cover of three times.

The board has declared a final dividend of 8 cents per share (2007: 6,1 cents), which together with the interim ordinary dividend of 4 cents, produces a total ordinary dividend declared for the year of 12 cents (2007: 11,4 cents), an improvement of 5, 3%.

Dividend Announcement

The board has declared a final dividend (number 84) of 8 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 August 2008. The shares of Italtile Limited will commence trading ex dividend from the commencement of business on Monday, 1 September 2008 and the record date will be Friday, 5 September 2008. Payments will be made on Monday, 8 September 2008.

Share certificates may not be rematerialised or dematerialised between Monday, 1 September 2008 and Friday, 5 September 2008, both days inclusive.


For and on behalf of the Board

G P E Ravazzotti
Chief Executive Officer


P D Swatton
Chief Financial Officer

The results have been reviewed by Ernst & Young and their review opinion is available on request from the company secretary at the company’s registered office or own address.

11 August 2008

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

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

Executive 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 K A Morolo, D H Rabin, G Zannoni**
(*British **Italian)