Financial results

Preliminary profit announcement and reviewed Group results
for the year ended 30 June 2013

Download the entire paid announcement 

Commentary |  System-wide turnover analysis |  Condensed Group statements of comprehensive income | 
Condensed Group statements of financial position |  Store network |  Condensed Group statement of cash flows 
Group statement of changes in equity
 |  Segmental report |  Notes



Italtile is the leading franchisor and retailer of local and imported tiles, sanitaryware, bathware, laminated flooring and other related home-finishing products in South Africa. The Group’s national branded retail store network comprises
117 CTM, Italtile Retail and TopT stores and has appeal for homeowners in the LSM categories 3 to 10. The brands are supported by a property investment portfolio and vertically integrated supply chain.


General economic uncertainty continued to constrain public and private sector investment in the new-build segment of the industry, although some improvement in the renovations market was experienced.

In the context of subdued global trading conditions, a sustained influx of imported product remained a feature of the local industry as international suppliers sought new markets for their merchandise. Particularly evident in the port cities, independent opportunist traders entered the market, many of them with minimal investment and unsustainable offerings. The instability created by these players impacted negatively on more established businesses, contributing to further downsizing and closures in the industry.

Currency volatility experienced during the period served to strain working capital of smaller businesses with the result that orders were only placed upon payment. The Group’s policy of ensuring consistent levels of stock on hand, supported by its strong statement of financial position, proved to be an important competitive advantage.


  • System-wide turnover increased 11% to R3,82 billion (2012: R3,43 billion).
  • Revenue from Group-owned stores and entities grew 16% to R2,05 billion (2012: R1,76 billion).
  • Reported trading profit improved 18% to R611 million (2012: R520 million). For the full year, gross margins declined slightly, a function of the Group’s decision to absorb increased costs and currency fluctuations to support franchisees and customers and demonstrate Italtile’s everyday value positioning.
    After a number of years of limited price inflation, average selling prices were increased in certain of the Group’s operations, including CTM, TopT and ITD, to offset significantly higher input cost pressures in the supply chain, while Italtile Retail’s average selling prices were deflationary.
  • Basic earnings per share for continuing operations increased 18% to 48,2 cents (2012: 40,8 cents per share) while headline earnings per share (‘HEPS’) for continuing operations rose 16% to 47,3 cents (2012: 40,7 cents per share). HEPS have been adjusted for a R13 million profit achieved on the disposal of property in South Africa and a R5 million impairment on Group property in Australia.
  • Inventory remained stable at R335 million (2012: R339 million), this level of stock-holding is part of the deliberate strategy to ensure consistent availability of a large range of merchandise, and a function of adding new ranges while continuing to sell out older ranges. Average stock turn improved across most operations.
  • Capital expenditure of R168 million (2012: R120 million) was incurred, primarily related to enhancing the Group’s property investment portfolio and revamping showrooms.
  • Notwithstanding the capital expenditure, the repayment of a R300 million long-term loan, and the acquisition of a 20% stake in Ceramic Industries, cash reserves were R303 million (2012: R917 million), reflecting Italtile’s strong cash generative nature.
  • Net asset value per share increased by 15% to 250 cents (2012: 218 cents).


Italtile’s improved results are a reflection of its commitment to continuous and consistent improvement in the business and the dedication of our people.

  • A range of structured best practice benchmarks across all core areas were refined, which delivered encouraging results.
  • Each of the brands focused greater attention on in-store efficiency improvements and training.
  • Ranges were revisited and refreshed and ambitious targets implemented to maximise the average basket and sales of complete solutions.
  • Cost containment and profitability were instilled as key performance indicators, assisting operators to build more lucrative businesses.
  • Throughout the supply chain improvements were evident in inventory and range management.
  • Innovations in technology were a focus during the period, including improvements in the Group’s online web-shopping capabilities, streamlined automated ordering systems, and in-store point-of-sales functionality.
  • The policy of ensuring constant availability of the right stock at the right price afforded the Group a significant competitive advantage.


The Group’s improved results were derived largely from organic growth, since a net increase of only five stores, mostly opened in the latter part of the review period, was recorded. Both the retail operations and the supply chain grew revenue and profitability and gained market share amongst new and existing customers. Higher sales volumes were achieved primarily in the DIY/renovations and Commercial projects markets. Central to this growth were more fashionable ranges, a deliberate strategy to upsell complete solutions of products, and ensuring that these brands remained leaders in offering best value (defined by consumers as fashion, quality, price and service).

In general, consumers remained cost conscious, and whilst the upper and lower LSM segments were reasonably buoyant, middle income consumers were less resilient. This price sensitivity was responded to across the brand network: Italtile Retail broadened its range to include appeal to the top end of the middle market, while CTM moved to increase its commodity-priced range for the cost-conscious and contract markets. TopT, which operates in the entry-level sector has developed its offering extensively for lower income earners.

Gauteng, North West, Mpumalanga and the Free State regions recorded good growth, while Limpopo and the coastal markets lagged the other provinces.

Towards and after period end there was a transition of franchised stores to Group-owned stores as franchise agreements ended. This development has provided an opportunity to re-invigorate underperforming regions.

Italtile Retail Italtile Retail is widely recognised as the industry fashion icon in the sophisticated home improvement market and leading buyer of exclusive high quality fashionable international and local products. The brand has a strong reputation as a trend-setter, and is the acknowledged front-runner in environmentally sensitive products.

Key achievements:

  • A pleasing rise in turnover, with particularly strong sales growth in the Bath Shop, and a gain in market share across the recently expanded product offering.
  • Noteworthy success recorded in the Commercial projects market, including the healthcare industry; corporate head offices; the hotel industry; and local and regional shopping centres. It is particularly rewarding to report that products across the range were supplied, including tiles, sanitaryware and brassware.
  • A new store will be opened at The Glen, in Johannesburg South, in the first quarter of the 2014 financial year.

CTM Catering for middle income DIY customers and small builders, CTM is the leading volume retailer of tiles, laminated flooring, brassware, sanitaryware, bathroom furniture and accessories.

Key achievements:

  • Satisfactory sales growth, and a meaningful increase in operating profit in Group-owned stores based on efficiency improvements in the business.
  • Expansion of the range of imported merchandise as well as the contemporary natural stone-, wood- and cement-look tile offering and new size formats, differentiating the brand from its competitors.
  • In-store enhancements and intensified training and education of staff to ensure more beautiful displays and increased product knowledge.
  • The refinement of an operating model – The 9 Key Disciplines – which served to deliver improvements across all critical areas of the business in four major categories.
  • Upgrade of the internet shopping facility to serve as a fully functional operational online trading store which is integrated into the Group’s SAP system and all CTM stores nationwide.
  • The opening of two new stores, one in North Riding in Gauteng (October 2012) and the other in Crossroads in the Western Cape (May 2013).
  • CTM’s Operator Training Programme launched in 2012 in conjunction with the University of Stellenbosch yielded 11 graduates – prospective store operators well qualified to manage successful businesses in the network.

Rest of Africa The Group is represented by 17 CTM stores in the rest of Africa region. Good growth was reported by CTM’s recently opened store in Kenya, as well as its existing stores in Tanzania, Namibia, Botswana and Lesotho.

Congestion in the East African ports and general logistical constraints continue to restrict growth of the CTM network, despite robust demand from the region.

Australia The Group has elected to discontinue its retail operation in Australia, which currently comprises seven CTM stores, trading out of predominantly company-owned properties. Accordingly, a buyer for the retail brand component is currently being sought, and the Group’s future focus will be concentrated on management of the properties.

Top T This brand is the Group’s entry-level value offering, supplying home-finishing products including tiles, paint, ceiling décor, vinyl floor covering, taps, sanitaryware, hardware and accessories to under-serviced rural and outlying markets in close proximity to urban townships.

Key achievements:

  • Following intensive refinement of the business model and strategy over several years, TopT delivered another strong performance, exceeding its budget and reporting record results and increased sales volumes across the product offering, demonstrating the brand’s expansion potential.
  • Operating in an extremely price sensitive market, the business succeeded in growing its average basket size based on a combination of aggressive pricing and pioneering new products and ranges. Increased focus was on expanding the home-finishing products offering.
  • TopT opened a net of four new stores, and commenced its foray into the KwaZulu-Natal region. The brand will undertake an aggressive roll-out campaign in the next five years. Master Licensees will be appointed on a regional basis and they, in conjunction with local black equity partners, will be responsible for growing the brand in their designated regions.

Support services The Group’s vertically integrated supply chain comprises International Tap Distributors (‘ITD’), an importer of brassware and accessories, Cedar Point, an importer and distributor of laminated flooring, cabinets, tiling tools and accessories, and Distribution Centre, which procures imported tiles for the retail brands and provides warehousing, distribution and foreign exchange services to the Group.

Each of the suppliers played an important role in underpinning the brands by enhancing their fashion/value offering. The individual business units all reported improved sales and trading profit, although some margin squeeze was experienced as a result of the deliberate strategy to support the retail operations’ pricing advantage.

A new Distribution Centre was established in Cape Town during the period; this facility will play an important role in streamlining distribution and logistics of imported product in the Western Cape and should assist in improving the Group’s performance in the region. Management’s key challenge will be to ensure that the appropriate product (in terms of design and price) is sourced for this particular market.


Ceramic Industries Limited (‘Ceramic’) As previously disclosed, during the period the Group acquired a 20% stake in its most significant supplier, Ceramic, a local manufacturer of tiles, sanitaryware and baths. This tactical investment to support Italtile’s growth strategy has proved useful, particularly given the volatility of the currency related to imported product and the Group’s stated goal to consistently carry optimum stock levels for customer convenience. Certain of Ceramic’s factories experienced production shortcomings in the reporting period, and whilst these have subsequently been addressed, Ceramic’s results for the seven months under-performed management’s expectations, contributing
R9 million to Group profit.

Ezeetile The Group has an effective 46% shareholding in Ezeetile, a national supplier of grout, adhesive and other products. During the year the business implemented SAP, facilitating alignment amongst Ezeetile’s six factories, as well as with the Group. This development will ensure improved logistics and inventory management, and accordingly improved profitability is expected. Ezeetile contributed R3 million (2012: R5 million) to Group profitability for the reporting period. This decrease is attributable to the impact of commissioning new factory equipment, updating manufacturing processes, as well as the initial bedding-down of SAP; this trend should be reversed in the forthcoming period.


The Group’s property portfolio supports its brands through high profile, easily accessible store locations, and well maintained aesthetically attractive shopping environments. Net of sale of properties the estimated current market value of this portfolio increased by R100 million to R1,6 billion. Capital expenditure in excess of R100 million was incurred on new and refurbished properties. An impairment of R5 million has been recorded on property in Australia, a reflection of adverse economic conditions in that country.


On 10 June 2013, the Board of Directors of Italtile (‘the Board’) announced that the Group’s Nominations Committee had been tasked with interviewing and appointing a Group Chief Executive Officer (‘CEO’). Further to that announcement, the Board advised on 25 July 2013 that Mr Nicholas (‘Nick’) Booth had been appointed as Group CEO with effect from 1 July 2014. Italtile founder, Mr Giovanni Ravazzotti will serve as CEO of the Group until Mr Booth’s effective appointment date, whereafter he will resume his position as non-executive Chairman.


Innovation in both products and technology is key to retaining and growing market share. The Group will continue to commit resources to furthering its goal to be at the forefront of leading-edge trends and developments in order to provide its customers with a superior shopping experience and its shareholders with a satisfying return on investment.

Efficiency and cost-containment drives will remain a priority, both in terms of improving profitability for the business as well as providing favourable pricing for customers based on a lower margin offering.

Only limited improvement in the local economy is anticipated in the near future. Continued difficult trading conditions will be exacerbated by Rand weakness, and competition in the industry is likely to intensify. Based on continued efforts to enhance the quality of the business, the supply chain and retail brands are expected to continue to deliver growth for the forthcoming period. A better than average contribution is anticipated from TopT specifically, as the impact of the aggressive planned store roll-out programme filters through.

The management and staff of Italtile responded enthusiastically to the difficult economic environment and strategic initiatives implemented across the Group in the year under review. Their continued commitment to the vision and goals of the business is to be acknowledged and congratulated.

Basis of preparation of accounting The Preliminary Profit Announcement has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, and contains the information required by International Accounting Standard 34, Interim Financial Reporting. These results have been prepared under the supervision of Chief Financial Officer, Mr B Wood CA(SA).

Ordinary dividend The Board has declared a final dividend (no 94) for the year ended 30 June 2013 of 8,0 cents per Italtile ordinary share (“share”) (2012: 7,0 cents per share), which together with the interim dividend of 8,0 cents per share (2012: 7,0 cents per share), produces a total dividend declared for the year ended 30 June 2013 of 16,0 cents per share (2012: 14,0 cents per share), an increase of 14%, to all shareholders recorded in the books of Italtile at the close of business on Friday, 6 September 2013. The Group has maintained its dividend cover of three times.

Special cash dividend The Board has declared a special dividend of 50,0 cents per share (2012: 0,0 cents per share) payable to shareholders.

The special dividend is part of the Group’s plan to optimally employ its capital structure. Italtile’s highly cash generative nature supports this strategy. In addition, the Group has no acquisitions planned for the immediate term.

Cash dividend timetable for ordinary cash dividend and special cash dividend (collectively “the dividends”)The cash dividend timetable for the dividends is structured as follows: the last day to trade cum dividend in order to participate in the dividend will be Friday, 30 August 2013. The shares will commence trading ex dividend from the commencement of business on Monday, 2 September 2013 and the record date will be Friday, 6 September 2013. The dividend will be paid on Monday, 9 September 2013. Share certificates may not be rematerialised or dematerialised between Monday, 2 September 2013 and Friday, 6 September 2013, both days inclusive.

Dividend announcement for ordinary cash dividend and special cash dividend Shareholders are hereby advised that the dividends will be subject to the Dividends Tax that was introduced with effect from 1 April 2012. In accordance with paragraphs 11.17 (a) (i) to (x) and 11.17 (c) of the JSE Listings Requirements, the following additional information is provided:

  • The dividend has been declared out of income reserves.
  • The local dividend tax rate is 15% (fifteen percent).
  • There are Secondary Tax on Companies (“STC”) credits to be utilised to the amount of R13 161 580,80 million or 1,27370 cents per share.
   Ordinary cash dividend   Special cash dividend  
Gross local dividend amount for shareholders exempt from the
Dividends Tax  
8,00000 cents per share   50,00000 cents per share  
Net local dividend amount for shareholders liable to pay the Dividend Tax   6,99106 cents per share   42,50000 cents per share  
Local dividend withholding tax amount for shareholders liable to pay the
Dividend Tax  
1,00894 cents per share   7,50000 cents per share  
  • Italtile’s income tax reference number is 9050182717.
  • The Group has 1 033 332 822 shares in issue including 25 488 781 shares held by the Share Incentive Trust and 88 000 000 shares held as BEE treasury shares.
For and on behalf of the Board  
G A M Ravazzotti   B Wood
Chief Executive Officer   Chief Financial Officer

The Preliminary Profit Announcement has been reviewed by Ernst & Young Inc. (“EY”). EY’s unqualified review opinion does not necessarily report on all of the information contained in this Preliminary Profit Announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of auditors engagement, they should obtain a copy of EY’s unqualified review opinion together with the accompanying financial information from the company secretary at the Company’s registered office.

14 August 2013