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ITALTILE LIMITED
(ITLTILE)
Share Code: (ITE)
ISIN Code : ZAE000003679
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2001
INTERIM PROFIT ANNOUNCEMENT
COMMENTARY
The group reported turnover of R533,2 million for the six months ended 31
December 2001, an improvement of 31% over the prior comparable reporting
period (2000: R407,4 million). Trading profit increased 35% to R50,1 million
(2000: R37,0 million), while headline earnings per share improved 33% to 191
cents (2000: 144 cents). The group remains ungeared, with the balance sheet
reflecting cash reserves of
R92 million.
A significant portion of turnover growth continues to be derived from
established operations. Management believes that the ceramic tile market in
South Africa is still evolving and offers potential in both the developed
and undeveloped sectors of the market. Margins firmed during the period
under review and cost control remains a continuous focus.
Italtile remains the leading global purchaser of ceramic tiles, which
affords the group a competitive edge in securing the best products at the
best prices. In its procurement activities, the company is consistently
vigilant in its search for enhanced value in new products and markets.
AFRICAN OPERATIONS
An ongoing programme of in-store enhancements and system improvements,
complemented by improved product mix, contributed to sound results for our
local operations.
The group's strategy of holding quality stock to support forward sales
proved prudent, given the sustained high demand for product over this
reporting period.
CTM continues to be the brand of choice in the value-for-money segment of
the market, evidenced by the division's sound performance over the past six
months.
In order to entrench its position as the fashion leader in the premium-end
market, the Italtile division will continue to secure leading-edge product
for the discerning customer. Management foresees significant potential in
this market segment.
In the company's preliminary profit announcement dated 14 August 2001, it
was announced that the group had launched an empowerment vehicle, consisting
of 50/50 partnerships between existing franchisees and black partners, aimed
at increasing black ownership, while ensuring mentoring and skills transfer.
The group now trades out of 16 group-owned CTM stores, 44 franchised CTM
stores, four empowered franchise CTM stores and 11 group-owned Italtile
stores.
The group is currently represented in South Africa, Botswana, Namibia,
Swaziland, Lesotho and Tanzania. Further expansion into Africa will be
realised with the introduction of operations in Malawi and Zambia, scheduled
for 2002. The group continues to actively explore opportunities in other sub-
Saharan markets.
The group made further investments in its property portfolio, bringing the
value to R199 million. This investment is in line with company philosophy
that group-owned and franchised stores should operate out of company-owned
premises. The highly visible store locations situated in prime positions
serve to support group brands. CTM's first Super-Store will be located in
Fourways, Johannesburg, and is expected to be trading by mid-2002.
INTERNATIONAL OPERATIONS
The company has been trading in Australia for 30 months and has completed
the first phase of penetration, namely creating and establishing brand
presence, and consolidating operations. Set-up costs have been absorbed, and
in line with management forecasts, the Australian operations reported a
profit. Management is confident that profitability is sustainable and is
positive about the growth potential of this market.
The group retains its nine CTM store presence across three states,
Queensland, New South Wales and Victoria, having closed one poorly located
store in Melbourne. The company does not anticipate opening any further
stores during the current year, but is considering franchising certain of
the operations in due course.
PROSPECTS
Italtile reported in its preliminary profit announcement that it would be
enhancing its existing franchise model to incorporate a joint venture
element. This arrangement aims to add value to the business while
encouraging entrepreneurship. Negotiations have been finalised to convert
existing group owned stores to this model, and by June 2002 it is
anticipated that two CTM and three Italtile joint venture franchises will be
operational.
The second phase of this programme will be implemented after July 2002 and
will see further group owned stores converted to joint ventures. Having
consolidated its position as a major franchisor,the company's long term goal
is to ensure that the bulk of the business vests in the hands of
franchisees. This strategy is centred on the improved responsiveness with
which franchises react to a changing market.
In addition to the proposed joint venture store expansion, further strong
growth is projected from the empowered-franchise vehicle, with significant
opportunities forecast in the short to medium term.
It is anticipated that the trading environment will remain challenging,
aggravated by the unfavourable exchange rate. Management is satisfied that
with continued focus on its core business, the group should deliver steady
growth.
ACCOUNTING POLICIES
The accounting policies applied are consistent with those of the prior
reporting period.
DIVIDEND
The Board has declared an interim dividend of 35 cents, an improvement of
21% (2000: 29 cents). The group will retain its cover at approximately five
times.
DIVIDEND ANNOUNCEMENT
The directors have declared an interim dividend (number 71) of 35 cents per
share to all shareholders. The last day to trade ("CUM" the dividend) in
order to participate in the dividend will be Friday, 1 March 2002. The
shares of Italtile Limited will commence trading "EX" dividend from the
commencement of business on Monday, 4 March 2002 and the record date will be
Friday, 8 March 2002. Payment will be made on or about Monday, 11 March
2002. Share certificates may not be dematerialised or rematerialised between
Monday, 25 February 2002 and Friday, 8 March 2002, both days inclusive.
For and on behalf of the Board
G A M Ravazzotti P D Swatton
Executive Chairman Chief Financial Officer
14 February 2002
(Rand 000's unless otherwise stated)
ABRIDGED GROUP INCOME STATEMENTS
Unaudited Unaudited Audited
six months to six months to year to
31 December % 31 December 30 June
2001 increase 2000 2001
TURNOVER
- By group owned stores 305 990 245 587 455 329
- By franchise owned
stores 227 162 161 808 332 595
TOTAL 533 152 30,9 407 395 787 924
Trading profit before
depreciation 56 033 41 116 88 852
Depreciation (5 923) (4 049) (6 497)
Trading profit 50 110 35,2 37 067 82 355
Interest received 1 005 712 1 983
Profit on sale of
fixed property 0 568 568
Profit before taxation 51 115 33,3 38 347 84 906
Taxation (15 781) (11 437) (27 307)
Profit after taxation 35 334 31,3 26 910 57 599
Outside shareholders'
interest (314) (53) 1 011
Earnings attributable to
ordinary shareholders 35 020 30,4 26 857 58 610
Number of shares in
issue (000's) 18 311 18 311 18 311
Earnings per
share (cents) 191,3 30,4 146,7 320,1
Headline earnings
per share (cents) 191,3 33,2 143,6 317,0
Dividends per
share (cents) 35,0 20,7 29,0 60,0
RECONCILIATION OF
HEADLINE EARNINGS
Earnings attributable to
ordinary shareholders 35 020 26 857 58 610
Profit on sale of
fixed property 0 (568) (568)
Headline earnings 35 020 26 289 58 042
CASH FLOW STATEMENT
Unaudited Unuadited Audited
six months to six months to year to
31 December 31 December 30 June
2001 2000 2001
Cash flows from
operating activities 78 741 39 928 56 401
Trading adjusted
for non-cash items 66 331 41 587 94 265
Working capital
movements 39 954 15 930 (7 400)
Cash generated from
operations 106 285 57 517 86 865
Interest received 1 005 712 1 983
Dividends paid (5 676) (5 917) (10 907)
Taxation paid (22 873) (12 384) (21 540)
Investing activities (33 537) (35 139) (47 362)
To expand operations (33 537) (32 319) (33 328)
To maintain operations 0 (2 820) (14 034)
Investment of minorities
in Italtile Australia 314 2 198 5 865
Net movement in cash
and cash equivalents 45 517 6 987 14 904
Cash and cash
equivalents at
beginning of period 46 660 31 756 31 756
Cash and cash
equivalents at end
of period 92 177 38 743 46 660
ABRIDGED GROUP BALANCE SHEETS
Unaudited Unuadited Audited
six months to six months to year to
31 December 31 December 30 June
2001 2000 2001
EMPLOYMENT OF CAPITAL
Non-current assets 244 573 180 747 209 089
Net current assets 29 562 24 034 25 678
Current assets 139 518 108 052 130 471
Liquid funds 92 177 38 743 46 660
Current liabilities (179 487) (105 074) (123 355)
Other payables and
accruals (16 112) (12 697) (22 297)
Shareholders for
dividend (6 534) (4 990) (5 801)
274 135 204 781 234 767
CAPITAL EMPLOYED
Ordinary shareholders'
interest 266 768 200 331 227 714
Outside shareholders'
interest 7 367 4 450 7 053
274 135 204 781 234 767
Net asset value per
share (cents) 1 497 1 118 1 282
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Unaudited Unuadited Audited
six months to six months to year to
31 December 31 December 30 June
2001 2000 2001
Balance at beginning
of period 227 714 178 826 178 826
Net profit for the
period 35 020 26 857 58 610
Dividends (6 409) (5 310) (10 986)
Currency translation
reserve 10 443 (42) 1 389
Dividends paid to
outside shareholders 0 0 (125)
Balance at end of
period 266 768 200 331 227 714
REGISTERED OFFICE The Italtile Centre, cnr Peter Place and
William Nicol Drive, Bryanston 2021 (PO Box 1689, Randburg 2125)
TRANSFER SECRETARIES Computershare Services Limited, Edura,
41 Fox Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107)
DIRECTORS G A M Ravazzotti (Executive Chairman), P D Swatton**,
J Couzis*, G Cousins, D H Rabin, B G van Rooyen, S Galli (alternate) *Greek
**British
Refer to Italtile's corporate website at www.Italtile.com
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