Financial results

Reviewed Group Results
For the year ended 30 June 2009

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 sustained economic downturn has dramatically curtailed consumer discretionary spend, hampering the sector’s performance. Notwithstanding these testing conditions, Italtile gained marginal market share and delivered creditable results in line with market expectations. The Group reported a 7% decline in organic system-wide turnover to R2,57 billion (2008: R2,77 billion).

In the current competitive market, the Group restricted price inflation to 2,5%. Reported trading profit decreased by 10% to R361 million (2008: R399 million). Group operating margin remained firm.

Despite reduced consumer traffic in general, the Group benefited from an increase in average selling price.

Inventory management has been a consistent theme throughout the review period. Stockturn remained a priority, both at store level and in the supply chain. Each successive quarter has witnessed a reduction in stockholding, resulting in a strong balance sheet and improved product mix. In December 2007, inventories were valued at R322 million, at June 2008 this was reduced to R263 million, and further reduced to R224 million by December 2008. The Group’s current inventory is R191 million, reflecting a decrease of 27% over the reporting period. Cash reserves have increased from R281 million in 2008 to R667 million, an improvement of 137%.

The tangible net asset value per share has increased by 13% to 169 cents (2008: 149 cents).

Trading Environment

In the current environment, consumers are increasingly discerning and value conscious. The Group’s high profile CTM brand offers fashion and quality at affordable prices and with constant review of the range, this brand succeeds in appealing to a broad spectrum of consumers. During the reporting period, the high volume first time home buyers market proved robust, with Black consumers particularly, driving growth.

Increased quantities of Chinese product are available in the market. In an effort to manage erratic supply, greater numbers of sector players are purchasing directly from wholesalers. Given this volatility of imports versus the superior quality of local product, the Group’s strategy has been to reduce dependence on imports and benefit from stable relationships with local suppliers, which ensures consistency of supply and quality.

Operational overview

In June 2008 the Group announced that it had equity-incentivised its two top performing Italtile store operators, with a view to harnessing the full potential of the brand. This strategy has begun to deliver sound results, with the brand reporting an improvement in turnover relative to the sector, and a gain in market share.

The sustained drive to improve training and recruitment has resulted in enhanced service delivery which has also benefited the brand. Investment in the campaign promoting Italtile’s 40th anniversary has further served to raise awareness of the brand.

Management is satisfied that this brand formula is reaching a level which can be rolled out to expand the current network of seven stores.

Within CTM, in-house brand building has been a major focus during the review period. High profile campaigns aimed at entrenching brands such as Kilimanjaro, Tivoli Taps and Studio Ceramico have delivered sound results and served to set the Group apart from peer retailers.

Skills development remains an important thrust for the Group. Ongoing investment in training programmes is beginning to bear results, reflected by the improvement in quality of management in Group-owned stores. Management is cognisant that the staff in the organisation are critical to its success, and subsequently will continue to drive training and mentorship programmes.

Improved systems and controls continued to be a focus. Enhancing efficiencies aimed at improving the customer’s shopping experience is critical to the success of the Group.

The Group’s fledgeling third brand, Top T, slots in strategically below the CTM brand, and targets developing rural towns and smaller informal markets. The introduction of Top T ensures the Group is represented across the consumer spectrum, from entry-level to niche premium end.

The current network of 8 stores will be expanded as opportunities arise.

The Group continued to optimise its supply chain with the acquisition of an interest in Ezeetile, a national manufacturer of adhesive, grout and related products. This investment serves to secure the supply of product and provides synergistic opportunities in the future.


The Group’s strategy in Africa is to build on existing relationships to entrench the brand’s presence and further develop territories in the 14 sub-equatorial store network.

At present the Group is evaluating opportunities in Zambia and Malawi where the Master Franchise licenses have expired.


Despite extremely difficult trading conditions, the Group’s Australian business, which comprises nine stores, produced an improved performance in the final three months of the review period to deliver a small trading profit. The model continues to be enhanced to leverage the operation’s potential.

Property Portfolio

The Group currently trades out of 152 000 m2 of trading and warehouse space, which at fair market value equates to R1,1 billion. Returns from this portfolio are in line with the Group’s trading operations.

During the review period R35 million was invested in new sites, store upgrades and relocations.


Notwithstanding strong cash reserves, the Group borrowed R227 million during the year, with a view to making significant investments, quickly, should the opportunity arise. The current market has seen a softening of land prices, with further declines anticipated and the group is well positioned to benefit from this as the industry rationalises further.


The trading environment will remain challenging for the next financial year.

Management’s challenge will be to retain and grow market share and ensure that the Group is well positioned to capitalise as the economy recovers.

Basis of Preparation

The Preliminary Profit Announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) and are in compliance with IAS 34, and is prepared on the historical cost basis, adjusted for the fair value of certain assets and liabilities. The same accounting policies and methods of computation have been applied as in the most recent annual financial statements. Intra group transaction analysis has been introduced in the segmental report in order to improve disclosure and make the report more meaningful.


The Group has maintained its dividend cover of three times.

The Board has declared a final dividend of 5 cents per share (2008: 8 cents), which together with the interim ordinary dividend of 6 cents, produces a total ordinary dividend declared for the year of 11 cents (2008: 12 cents), a decrease of 8%.

Dividend Announcement

The Board has declared a final dividend (number 86) of 5 cents per share to all shareholders recorded in the books of Italtile. The last day to trade cum the dividend will be Friday, 28 August 2009. The shares of Italtile Limited will commence trading ex dividend from the commencement of business on Monday, 31 August 2009 and the record date will be Friday, 4 September 2009. Payments will be made on Monday, 07 September 2009.

Share certificates may not be rematerialised or dematerialised between Monday, 31 August 2009 and Friday, 4 September 2009, 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 2009

Share code: ITE       ISIN: ZAE000099123       Reg Number: 1955/000558/06
Incorporated in the Republic of South Africa       ("Italtile" or "the Group")

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 M Du Toit, S I Gama, G K A Morolo, D H Rabin, G Zannoni** (*British **Italian)

Sponsor: BJM Corporate Finance (Pty) Limited