Financial results

Reviewed Group Results
For the year ended 30 June 2002

Download the entire paid announcement 

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

Commentary

In financial year 2000 Italtile Limited announced its strategic intention to realise annual turnover of R5 billion by the end of the current decade. The group has achieved a significant milestone towards attaining that goal, and successfully extended its market leadership, by delivering turnover of R1,1 billion (2001: R788 million) for the year to 30 June 2002.

The group's enhanced turnover growth - derived primarily from existing operations - substantiates management's view that the South African ceramic tile market still affords significant growth opportunities in both the developed and undeveloped sectors of the market. Management is confident that in line with global industry trends, further expansion can be anticipated based on the product's accessibility and acceptability to all sectors of the market and furthered by its status as the most cost-effective, most durable and most hygienic wall and floor covering.

The company projects that South Africa's current tile consumption of approximately 30 million square metres per annum will swell to around 35 million square metres per annum by June 2003, with further sustained growth predicted over the long term. This projection is supported by comparative research conducted in Brazil and Indonesia - countries which evince market conditions similar to South Africa - which reflects per capita consumption in excess of 1,5 square metres compared to South African consumption of approximately 0,75 square metres per capita, and illustrates the development potential of the local industry.

The period under review featured relatively buoyant trading conditions, which assisted the company to deliver its eleventh consecutive year of earnings improvement. Trading profit increased by 57% to R129 million (2001: R82 million), while headline earnings per share improved by 64% to 518 cents (2001: 317 cents). The balance sheet reflects cash reserves of R92 million, which will fund future expansion.

Central to turnover growth was enhanced entrepreneurial interest in the business. This reporting period featured consolidation of the company's long-term strategic goal to empower and energise individuals at every level of the business and evolve the organisation structure from predominantly group-owned stores to franchised stores. This strategy is based on the group's philosophy that there is no substitute for owner-driven businesses and respects the improved responsiveness with which franchises react to a changing market.

The group's three franchise-linked vehicles: 100%-franchises, joint venture franchises and black empowered franchises all performed well and afford important expansion opportunities.

Judicious investment in stock holding was made in the last quarter of 2001, a strategy which paid off handsomely. In the industry context of reduced import activity resulting from the devaluation of the rand, the company was able to capture a sizeable portion of the market by meeting demand. This afforded the group inroads into new markets, and served as a driver of profits.

Property Portfolio

Group-owned and franchised stores operate out of company-owned premises situated in highly visible, prime locations, positioned to support group brands. During the period under review, the group invested a further R50 million in property, increasing the value of the portfolio to R212 million. The company will continue to invest in property given this portfolio's contribution to profits.

African Operations

Both the CTM and Italtile divisions reported satisfying growth, with the company growing market share in the value-for-money and premium-end sectors respectively. The company trades out of a total 85 stores in Southern Africa.

Based on the leverage afforded by the company's standing as the leading global purchaser of ceramic tiles, both divisions succeeded in restricting price increases to below the industry norm.

Italtile

Italtile continued to entrench itself as the first-choice purveyor of high quality product in the premium-end market. The product range continued to be carefully refined in recent months and significant growth is anticipated in this niche of the market.

The Italtile brand is represented through three company-owned stores, one franchised store and seven joint-venture stores.

CTM

Prudent purchasing ensured that the division remained receptive to consumer appetite and continued to offer access to customers across the spectrum.

The CTM Super Store, situated in Fourways and scheduled to commence trading in August, is representative of the group's vision to upgrade and enlarge stores to reflect an aesthetically enhanced shopping experience without losing sight of offering value for money.

CTM experiences strong brand awareness in rural areas and the group intends capitalising on the extensive growth opportunities afforded.

North of South Africa, the division's presence extends to Botswana, Namibia, Swaziland and Lesotho, with the fledgeling operation in Tanzania delivering good returns. Further expansion into Africa is anticipated with the establishment of stores in Malawi and Zambia. Management is of the opinion that the Southern African region affords important opportunities to entrench the CTM brand and develop the market.

The CTM brand is currently represented by eight company-owned stores, 52 franchised stores, five empowered franchise stores and eight joint-venture stores.

Pursuant to the group's strategy to position itself as a franchisor first and foremost, the intention is to continue to reduce the number of company-owned stores

International Operations

In Australia the group trades out of nine stores situated in the states of Queensland, New South Wales and Victoria. As undertaken by management, the operation was successfully turned around from a loss-making position to deliver a respectable profit, which is deemed to be sustainable over the long-term.

With continued fine-tuning of the trading concept, it is anticipated that the Australian operation will become a major contributor to the group's growth strategy.

Prospects

The group's ambitious long-term growth strategy will be facilitated by the continued positive trading conditions anticipated in the medium term and the potential offered by the African and international operations.

Management is satisfied that with continued focus on its core business the group will deliver satisfactory results for shareholders.

Dividend

The Board has declared a final dividend of 65 cents, which together with the interim dividend of 35 cents produces a total dividend of 100 cents (2001: 60 cents), an improvement of 67%.

Dividend Announcement

The directors have declared a final dividend (number 72) of 65 cents per share to all shareholders registered in the books of Italtile Limited. The last day to trade ("CUM" the dividend) in order to participate in the dividend will be Friday 23 August 2002. The shares of Italtile Limited will commence trading "EX" dividend from the commencement of business on Monday 26 August 2002 and the record date will be Friday 30 August 2002. Payment will be made on Monday 2 September 2002. Share certificates may not be dematerialised or rematerialised between Monday 26 August 2002 and Friday 30 August 2002, both days inclusive.


For and on behalf of the Board

G A M Ravazzotti
Executive Chairman

 

P D Swatton
Chief Financial Officer

7 August 2002


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

Transfer Secretaries: Computershare Services Limited, Edura, 41 Fox Street, Johannesburg 2001 (P O Box 61051, Marshalltown 2107

Directors: G A M Ravazzotti (Chairman), P D Swatton**, J Couzis*, G Cousins, D H Rabin, B G van Rooyen *Greek ** British