Financial results

Interim Results
For the six months ended 31 December 2000

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Commentary | Income statements | Balance sheets | Cash flow statement |
Statement of changes in equity

Commentary

Italtile Limited has delivered a satisfactory set of results for the six months ended 31 December 2000, in line with management forecasts. The company reported an improvement in operating profit of 30%, up from R28 million to R37 million. Headline earnings per share increased by 26% to 144 cents per share (1999: 114 cents.) The group remains ungeared.

During the prior reporting period the company declared its strategic thrust to position itself as a major franchisor. In furthering its stated policy of streamlining the parent operation while growing market share and fostering entrepreneurial opportunities, an additional seven group-owned stores were franchised between January 2000 and January 2001. The effect of this policy is demonstrated in the segmental analysis which shows the turnover of franchised stores having increased by 83% from R88 million to R162 million, while turnover of group-owned stores improved by 3.2% from R238 million to R246 million. Turnover for the entire group increased by 25%, from R326 million to R407 million.

In the preliminary profit announcement for the year ended 30 June 2000, the group outlined its key objectives:

  • Advance the trend from group-owned to franchised stores;
  • Improve efficient utilisation of working capital;
  • Focus on distribution, and improve stock levels; and
  • Increase presence in foreign markets.

The Board is satisfied that these objectives are being addressed. Stock holding has been reduced by R11 million, reflecting prudent management.

Despite the depreciating South African rand, Italtile continues to be able to source product internationally at the most competitive prices because of the leverage afforded by its position as the largest purchaser of ceramic tiles in the world.

Southern African Operations

The Board is pleased to report solid growth by both its divisions, CTM and Italtile. s

The group continued to focus on its ongoing programme of improvements, investing in in-store enhancements and extensive staff training. The company's systems upgrade has been successfully implemented and will leverage greater efficiencies out of the business.

The company now trades out of 18 group-owned CTM stores, 38 franchised CTM stores and 11 Italtile stores.

During the period under review, the group's fixed assets increased by R24 million with further investment in the property porfolio, raising the value of the group's real estate to approximately R150 million. Italtile's policy is to ensure that both group-owned and franchised stores operate out of company -owned premises. The highly visible, prime-position locations serve to support group brands and generate cash for the group. The group's flagship Italtile showroom opened in Peter Place, Bryanston, in November 2000 and has traded successfully.

International Operations

During the previous reporting period, the group announced that within 12 months it would open a further four stores in Australia. The company now operates seven stores across Sydney, Melbourne and Brisbane, with additional stores scheduled to open this year. Despite the company's conservative policy with regard to set-up costs, and the challenge of establishing brand presence in a new market, the Australian operations performed satisfactorily and are expected to break even in the current year. Management is positive about the division's potential and perceives attractive expansion opportunities in that country.

To date expansion has been funded through company reserves.

Accounting Policies

The accounting policies applied have been consistent with that of the prior year.

Prospects

The Board is satisfied that Italtile is on track to deliver its tenth successive year of earnings improvement. The group will continue to focus on aggressive cost control and improved margins.

Dividend

The Board has declared an interim dividend of 29 cents, an improvement of 26% (1999: 23 cents). The group will retain its dividend cover at approximately 5 times.

For and on behalf of the Board

G A M Ravazotti
Chairman

 

P D Swatton
Chief Executive Officer