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Italtile Limited - Preliminary Profit Announcement Group Results for the year
ended 30 June 2002
Italtile Limited
(ITALTILE)
(ITE)
ISIN: ZAE000003670
Preliminary profit announcement
Group results for the year ended 30 June 2002
- 10 year compound growth 35,6%
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
Abridged group income statements
(Rand 000`s unless otherwise stated)
Reviewed Audited
year to year to
30 June 30 June %
2002 2001 Increase
TURNOVER
By group owned stores 619 812 455 329
By franchise owned stores 469 797 332 595
TOTAL 1 089 609 787 924 38,3
Trading profit before
depreciation 140 841 88 852
Depreciation (11 586) (6 497)
Trading profit 129 255 82 355 57,0
Interest received 3 129 1 983 57,8
Dividends received 572 -
Profit on sale of fixed
property - 568
Profit before taxation 132 956 84 906 56,6
Taxation (36 565) (27 307) 33,9
Profit after taxation 96 391 57 599 67,3
Outside shareholders` interest (1 476) 1 011
Earnings attributable to
ordinary shareholders 94 915 58 610 61,9
Number of shares
in issue (000`s) 18 311 18 311
Earnings per share (cents) 518,3 320,1 61,9
Headline earnings
per share (cents) 518,3 317,0 63,5
Dividends per share (cents) 100,0 60,0 66,7
RECONCILIATION OF
HEADLINE EARNINGS
Earnings attributable to
ordinary shareholders 94 915 58 611
Profit on sale of
fixed property - (568)
Headline earnings 94 915 58 043
Abridged group balance sheets
(Rand 000`s unless otherwise stated)
Reviewed Audited
year to year to
30 June 30 June
2002 2001
ASSETS
Non-current assets 256 959 209 089
Fixed assets 232 008 191 244
Other long-term assets 24 951 17 845
Current assets 300 853 177 131
Inventories 144 131 89 894
Trade and other receivables 64 944 40 577
Cash and cash equivalents 91 778 46 660
Total assets 557 812 386 220
EQUITY AND LIABILITIES
Capital and reserves 325 953 233 515
Stated capital 18 457 18 457
Non-distributable reserve 11 168 1 436
Retained profit 296 328 213 622
Outside shareholders` interest 8 529 7 053
Non-current liabilities 15 140 8 073
Deferred tax 1 403 985
Long-term liabilities 10 792 4 143
Provision for warranties 2 945 2 945
Current liabilities 208190 137 579
Trade and other payables 187 750 123 355
Taxation 20 440 14 224
557 812 386 220
Net asset value per
share (cents) 1 827 1 314
Cash flow statement
(Rand 000`s unless otherwise stated)
Reviewed Audited
year to year to
30 June 30 June
2002 2001
Cash flow from operating
activities 97 925 56 401
Trading adjusted for
non-cash items 150 573 94 464
Working capital movements (14 209) (7 400)
Cash generated from operations 136 364 87 064
Interest and dividends received 3 701 1 983
Dividends paid (12 209) (11 106)
Taxation paid (29 931) (21 540)
Investing activities (59 456) (47 362)
To expand operations (51 090) (33 328)
To maintain operations (8 366) (14 034)
Increase in long-term
liabilities 6 649 -
Investment of minorities in
Italtile Australia - 5 865
Net movement in cash and
cash equivalents 45 118 14 904
Cash and cash equivalents
at beginning of period 46 660 31 756
Cash and cash equivalents
at end of period 91 778 46 660
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2002
(Rand 000`s unless otherwise stated)
Stated Translation Retained
Group capital reserve profit Total
Balance at 30 June 2000 18 457 47 166 243 184 747
Net profit for the year 58 485 58 485
Dividends paid (11 106) (11 106)
Currency translation
difference 1 389 1 389
Balance at 30 June 2001 18 457 1 436 213 622 233 515
Net profit for the year 94 915 94 915
Dividends paid (12 209) (12 209)
Currency translation
difference 9 732 9 732
Balance at 30 June 2002 18 457 11 168 296 328 325 953
SEGMENTAL REPORTING
for the year ended 30 June 2002
(Rand 000`s unless otherwise stated)
Properties
and
Retail franchising Corporate Group
Reviewed year to
June 2002
Turnover 619 812 469 797 1 089 609
Segment results 72 406 51 136 5 713 129 255
Audited year to
June 2001
Turnover 455 329 332 595 787 924
Segment results 42 456 30 471 9 428 82 355
NOTES TO THE ABRIDGED ANNUAL FINANCIAL STATEMENTS
- There have been no changes in accounting policies during the year ended 30
June 2002, apart from the adoption of AC 107.
- The reviewed results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice.
- There are no contingent liabilities or assets at 30 June 2002.
- The results have been reviewed by Italtile`s auditors, Ernst & Young Chartered
Accountants (SA) and their review opinion is available for inspection at
Italtile`s registered office.
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
Refer to Italtile`s corporate website at www.Italtile.com
Date: 07/08/2002 10:00:00 AM Supplied by www.sharenet.co.za
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