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Preliminary profit announcement, reviewed Group results for the year ended 30 June 2015 and dividend declaration
Italtile Limited
Share code: ITE
ISIN: ZAE000099123
Registration number: 1955/000558/06
Incorporated in the Republic of South Africa
(“Italtile” or “the Group”)
Preliminary profit announcement, reviewed Group results
for the year ended 30 June 2015 and dividend declaration
System-wide turnover#
R5,22 billion
- 2014: R4,46 billion
Earnings per share#
75,9 cents
- 2014: 57,4 cents
Trading profit#
905 million
- 2014: R751 million
Total ordinary dividend per share
25 cents
- 2014: 19,0 cents
#From continuing operations.
Commentary
Overview for the year ended 30 June 2015
Italtile Limited is a franchisor and retailer of local and imported tiles, sanitaryware, bathware, laminated flooring
and other related home-finishing products. The Group’s retail operation comprises three brands: Italtile Retail, CTM and
TopT, represented by a total network of 126 stores in Southern and East Africa. The brand offering targets homeowners
across the LSM categories 4 to 10.
The Group’s retail operation is strategically supported by a vertically integrated Supply Chain, investments in key
suppliers, and an extensive property portfolio.
At the outset of the year, management highlighted a range of opportunities which would be capitalised on to grow the
business and gain market share through fulfilling the Group’s chief goal: to deliver an unparalleled shopping experience
for its customers. The theme underlying this growth strategy would be retail excellence - an intensive focus on all the
customer-facing elements of the Group’s offering. The growth opportunities would be realised under the auspices of a
company-wide Business Optimisation Programme (BOP), to be implemented in the key areas across the business in two
phases. The programme would commence with the back-end functions including the Supply Chain businesses and the
Support Services divisions, while the second phase, scheduled for FY2016, would be implemented in the front-end retail
brand operations.
Management is pleased to report that the first phase of the programme, which focused on leveraging the relationship
between the Supply Chain and the retail operations, has been implemented, delivering satisfactory results. Enhanced
performances were also reported by the Support Services departments, IT, e-commerce and human resources, all functions
critical to the Group’s long-term growth strategy and sustainability.
Trading environment
During the review period, while the renovations segment of the building industry continued to grow incrementally, no
recovery materialised in the new build segment as infrastructure constraints (water, sanitation and power) hampered the
roll-out of new housing developments. This situation is expected to persist in the foreseeable future.
There was also a notable deterioration in investment sentiment and property-related spend as consumer confidence
dropped to record low levels in the country. At the top end of the income spectrum, customers adopted a selective “wait and
see” approach to property investment; in the middle-income market, the Group’s core target audience, consumers remained
highly price sensitive and value conscious as they experienced intensifying pressure on disposable income. Discretionary
spend was allocated cautiously, after extensive research, on tried-and-tested high profile brands. Customers with finite
resources in the entry level segment continued to invest small amounts in their homes, on an ongoing basis, and as and
when funds were available. In rural and outlying areas consumers’ purchasing decisions demonstrated preference for ease
of access to one-stop shopping offerings which assisted in overcoming transport and logistical constraints.
Nationally, the trading environment remained competitive. Intensified promotional activity and price-cutting featured
throughout the period, as traders sought to reduce inventory levels and free up cash flow in the context of the
deteriorating economy and local currency. In these conditions the Group’s sound balance sheet and integrated Supply Chain,
which facilitated consistent availability of competitively priced quality merchandise, stood the business in good stead.
Results
Despite the subdued economic climate, the Group recorded double digit growth across its trading regions. Improved
sales and profitability were delivered by each of the three retail brands and the Supply Chain businesses, and across most
of the merchandise categories.
This performance is largely attributable to better execution of basic retail principles and best practice in store, as
well as improvements in the key back-end functions: suppliers, systems, and logistics.
Another notable achievement was the quicker than anticipated roll-out of TopT stores due to the availability of
suitable sites. During the period eleven new TopT stores were opened.
Financial highlights - continuing operations
The financial information outlined below refers to continuing operations only.
System-wide turnover grew 17% to R5,22 billion (2014: R4,46 billion), while same store revenue increased 16%. Average
selling price inflation was 7%. In a year-on-year comparison, the Group reported a stronger performance in the first
half than the second six months.
Margins were forfeited in both the Supply Chain and retail operations due to the deliberate strategy to absorb
increased costs and contain price inflation to entrench the Group’s position as the price leader in a number of categories,
and offset the effect of Rand weakness which drove up prices of imported product.
Trading profit increased 21% to R905 million (2014: R751 million).
Overheads were reduced as a result of improved management of utilities, and containment of delivery and transport
costs. Efficiencies were also gained across the Administration functions.
Earnings per share increased 32% to 75,9 cents (2014: 57,4 cents), while headline earnings per share rose 22% to
71,6 cents (2014: 58,7 cents). Earnings reflect the impact of the following:
- An IFRS 2 charge of R12 million (2014: R17 million) related to the Italtile Staff Share Scheme, of which R7 million
(2014: R11 million) is an accelerated charge related to franchise staff;
- The increased contribution of R62 million (2014: R29 million) to Group profit from associates Ceramic Industries
(Pty) Ltd and Ezeetile;
- Net finance income of R11 million (2014: net finance cost of R9 million) attributable to the settlement of long-term
debt and improved net cash holdings of the Group;
- A lower effective tax rate resulting from reduced consolidated Dividend Withholding Tax charges compared with the
prior corresponding period and the income tax benefit of share awards vesting and payments in the current period;
- A gain of R14 million derived from the loss of control of a subsidiary (SER-Export s.p.a.) to an associate,
following the disposal by the Group of a portion of its shareholding in this company; and
- A once-off gain of R19 million resulting from the reclassification to income of foreign currency translation
reserve related to Italtile Mauritius Proprietary Limited, previous bearer of certain of the Group’s non-South African
trademarks, following the liquidation distribution of that company’s net assets to South Africa.
Inventories rose to R479 million (2014: R408 million) in line with increased sales growth, although controls ensured
stock turn was commensurate, and stock losses were contained. Stock management across the business has been prioritised
as a key strategic initiative.
Capital expenditure of R219 million (2014: R166 million) was incurred largely on the Group’s property investment
portfolio related to an ongoing store upgrade programme and the acquisition of four properties during the period.
Investments were also made in IT requirements related to the BOP. In the review period dividend payments totalled
R212 million, and loans totalling R136 million were settled, resulting in net cash reserves of R392 million
(2014: R249 million) at the end of the period.
The Group’s net asset value was 296 cents per share (2014: 243 cents per share).
Operational review
Retail brands
The retail operations comprising Italtile Retail, CTM and TopT, performed well, reflected by each brand’s growth and
gain in new market share across most trading regions and merchandise categories.
Italtile Retail
This business delivered solid results, primarily based on improved efficiencies, intensified cost management, and
increased market share. Notable growth was recorded by the Commercial Projects division which completed an extensive
portfolio of projects, ranging from office blocks, shopping centres and warehouses, to bespoke buildings in the education,
health and religious sectors. Italtile Retail is recognised in South Africa as the leading supplier of environmentally
sensitive products, a factor which affords the brand an advantage in the commercial projects industry.
CTM
CTM reported double digit sales growth across all of its trading regions. Notably, the coastal markets which have
historically under-performed their counterparts, outpaced the inland regions.
Growth was achieved across the range of merchandise categories, with creditable results reported by the Bathroom
Boulevard and laminate flooring segments. The value of the average basket also increased, reflecting an improvement in
product range, mix and price, and more effective customer interactions.
In-store efficiencies were enhanced through better analysis of trading data and standardisation of best practice
disciplines across the store network.
Capacity and capability improvements were effected through staff changes at senior management and store operator
level, while advancements were made in recruitment processes and personnel development, contributing to closer alignment
with the brand’s growth ambitions.
The brand’s web store reported an improved performance for the year, increasing online sales above expectations.
TopT
TopT reported sound results for the period, growing turnover and profit and gaining market share in new and existing
markets.
During the year the business made progress in achieving its priority objectives, including the goal to roll out five
to ten new stores annually. Eleven stores were opened across five provinces in the reporting period and a further three
opened shortly after year-end. The brand is now represented in seven provinces.
Within the business, cost management and stock turn improved; supplier relationships were extended and improved; and
enhancements were made in store layouts, ranges, systems and processes. Particular attention was paid to appointing and
developing fit-for-purpose staff, and the management team was restructured to facilitate the brand’s growth forecasts.
Supply Chain
The Group’s vertically integrated Supply Chain businesses, International Tap Distributors, Cedar Point and
Distribution Centre, underpin the retail brand operations and enhance customer service through continuous and consistent
availability of the right product at the right time and place. Each of these businesses reported increased turnover and
profitability, reflecting improved sales to the store network across the brand portfolio. In light of the weaker currency,
margin pressure was experienced as a result of the deliberate strategy to limit average price increases to support the
competitive offering in-store.
Investment in associates
Ceramic Industries (Pty) Ltd (“Ceramic”)
Ceramic is Italtile’s primary supplier of tiles, sanitaryware and baths. The strategic 20% investment which the Group
holds in this business serves to provide tactical advantage and underpin its growth programme.
In the year under review Ceramic increased its contribution to Group profit to R55 million from R24 million in the
prior period. This strong improvement is attributable to higher production volumes, supported by Rand weakness, which led
to better capacity utilisation and enhanced efficiencies. In addition, improved margins were achieved through price
recovery and intensified management of input costs.
Ceramic’s new plant, Gryphon, is scheduled to commence manufacturing in November 2015. The factory will produce large
format glazed porcelain tiles which will compete favourably with imported product.
Ezeetile
The Group holds an effective 46% stake in Ezeetile, a national manufacturer of grout, adhesive and related products.
Following an extensive organisation-wide restructuring programme, the operation made progress in achieving enhanced
efficiencies in the factories and gaining market share. For the year under review, the business contributed R7 million
(2014: R5 million) to Group profits.
Property investment portfolio
This division has strategic advantage for the Group’s retail operations through ensuring that the brands are
represented by well-maintained stores situated on highly visible, accessible sites. Management’s goal to deliver an optimal
shopping experience for customers is advanced through this division’s continuous evaluation and enhancement of its property
portfolio. As at 30 June 2015 the portfolio had an estimated market value of R2,0 billion (2014: R1,9 billion). During
the review period R157 million (2014: R96 million) was invested in an ongoing store upgrade programme and the acquisition
of four properties. Eleven new TopT stores were opened and nine stores across all brands were renovated.
Management’s strategy to introduce flexibility to the CTM store size format is underway, designed to ensure that new
stores are optimally aligned with their specific market size, and affording the brands the opportunity to extend their
presence in new, smaller non-traditional markets where they are currently under-represented. A pipeline of sites has been
secured which will ensure that the Group’s three-year expansion plan is on track.
The Group also owns and manages a small portfolio of retail properties in Australia, which are leased out. During the
period one of the five owned properties was sold. A net loss of R3 million (AUD360 000) was made on the sale, reflecting
the weak state of the commercial property market in that country. The carrying value of the balance of the portfolio is
R97 million (2014: R129 million).
Staff Share Scheme
The Group’s equity-settled Staff Share Scheme is designed to incentivise employees to participate in the growth and
profitability of the business. During the reporting period a second allotment of 3,6 million shares (2014: first
allotment of 15,0 million shares) was made to 171 eligible local and foreign employees of the Group and franchisees
(2014: 499 eligible local employees).
Prospects
The trading environment is likely to remain largely unchanged. In the event of further Rand weakness, continued
rationalisation, especially amongst smaller independent traders, is anticipated.
If prevailing conditions do not deteriorate further and the Group succeeds in capitalising on the growth opportunities
which exist in the business and the market place, Italtile should deliver results in line with its current performance
in the next reporting period.
The opportunities for growth are internal and external:
- The Business Optimisation Programme will be rolled out to the retail brand operations. Further investment will be
made in systems, technology and human resources to achieve the programme’s goals; it is anticipated that full
implementation of this intervention will take up to three years.
- In the light of sustained demand for the Group’s offering and steady growth in market share in traditional and new
markets, the business will continue to expand its retail footprint across all three brands. The pace of this programme
will be determined by availability of suitable sites and franchisees.
Subsequent events
No events, other than those disclosed in note 4 to the condensed financial information, have occurred subsequent to
the reporting period that require any additional disclosures or adjustments.
Cash dividend
The Group has maintained its dividend cover of three times. The Board has declared a final gross cash dividend of
13,0 cents per share (2014: 10,0 cents per share), which together with the interim gross cash dividend of 12,0 cents per
share (2014: 9,0 cents per share), produces a total gross cash dividend declared for the year ended 30 June 2015 of
25,0 cents per share (2014: 19,0 cents per share), an increase of 32%.
Dividend announcement
The Board has declared a final gross cash dividend (number 98) for the year ended 30 June 2015 of 13,0 cents per
ordinary share to all shareholders recorded in the books of Italtile as at the record date of Friday, 18 September 2015.
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 Withholding Tax rate is 15% (fifteen percent).
- The gross local dividend amount is 13,00000 cents per share for shareholders exempt from the dividends tax.
- The net local dividend amount is 11,05000 cents per share for shareholders liable to pay the dividends tax.
- The local Dividend Withholding Tax amount is 1,95000 cents per share for shareholders liable to pay the dividends
tax.
- Italtile’s income tax reference number is 9050182717.
- The Group has 1 033 332 822 shares in issue including 21 078 846 shares held by the Italtile Share Incentive Trust
and 88 000 000 shares held as BEE treasury shares.
Timetable for cash dividend
The cash dividend timetable is structured as follows: the last day to trade cum dividend in order to participate in
the dividend will be Friday, 11 September 2015. The shares will commence trading ex dividend from the commencement of
business on Monday, 14 September 2015 and the record date will be Friday, 18 September 2015. The dividend will be paid on
Monday, 21 September 2015. Share certificates may not be rematerialised or dematerialised between Monday, 14 September
2015 and Friday, 18 September 2015, both days inclusive.
The full Reviewed Group Results Announcement has been released on SENS and is available for viewing on the company’s
website (www.italtile.com); furthermore, it is available for inspection at the registered offices of Italtile and the
sponsors Merchantec Capital during business hours. Copies of the full announcement are available at no cost on request and
may be obtained from the Company Secretary who is contactable on: +27 11 882 8200 or: liz@rootginger.co.za.
For and on behalf of the Board
N Booth B Wood
Chief Executive Officer Chief Financial Officer
No forward looking statements in this announcement have been reviewed or reported on by the Group’s auditors.
The Condensed Group Results Announcement for the year ended 30 June 2015 on pages 6 to 12 has been reviewed by Ernst &
Young Inc. (“EY”). EY’s unmodified review conclusion does not necessarily report on all of the information contained in
this Condensed Group Results 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 unmodified review opinion together
with the accompanying financial information from the Company Secretary at the company’s registered office.
Johannesburg
25 August 2015
System-wide turnover analysis
For the year ended 30 June 2015
Reviewed Audited
year to year to
% 30 June 30 June
(Rand millions unless otherwise stated) increase 2015 2014
Group and franchised turnover (continuing operations)
- By Group owned stores and entities 3 115 2 714
- By franchise owned stores (unaudited) 2 109 1 747
Total 17 5 224 4 461
Store network
At 30 June 2015
2015 2014
Region Franchise Corporate Total Franchise Corporate Total
South Africa
- Italtile - 9* 9 - 8 8
- CTM 32 34* 66 31 36* 67
- TopT 29 6 35 18 6 24
Rest of Africa 10 6 16 11 5 16
71 55 126 60 55 115
*Includes web store.
Condensed Group statements of comprehensive income
For the year ended 30 June 2015
Reviewed Audited
year to year to
% 30 June 30 June
(Rand millions unless otherwise stated) increase 2015 2014
Continuing operations
Turnover 3 115 2 714
Cost of sales (1 911) (1 657)
Gross profit 14 1 204 1 057
Other operating income 330 245
Operating expenses (636) (560)
Profit on sale of property, plant and equipment 7 9
Trading profit 21 905 751
Financial revenue 17 11
Financial cost (6) (20)
Profit from associates - after tax 62 29
Profit before taxation from continuing operations 27 978 771
Taxation (247) (227)
Profit for the period from continuing operations 34 731 544
Discontinued operations
(Loss)/profit after tax for the year from
discontinued operations - (20)
Profit for the period 40 731 524
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Currency translation difference 21 9
Other comprehensive income from associates (3) 3
Total comprehensive income for the period 40 749 536
Profit attributable to:
- Equity shareholders 700 509
- Non-controlling interests 31 15
40 731 524
Total comprehensive income attributable to:
- Equity shareholders 718 521
- Non-controlling interests 31 15
40 749 536
Earnings per share (all figures in cents):
- Earnings per share 37 75,9 55,3
- Headline earnings per share 24 71,6 57,6
- Diluted earnings per share 37 75,0 54,7
- Diluted headline earnings per share 24 70,8 57,1
Earnings per share from continuing operations
(all figures in cents):
- Earnings per share 32 75,9 57,4
- Headline earnings per share 22 71,6 58,7
- Diluted earnings per share 32 75,0 56,9
- Diluted headline earnings per share 22 70,8 58,1
- Dividends per share 32 25,0 19,0
Condensed Group statements of financial position
As at 30 June 2015
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) 2015 2014
ASSETS
Non-current assets 2 023 1 856
Property, plant and equipment 1 296 1 296
Investment property 97 -
Investments in associates 591 522
Long-term assets 15 14
Goodwill 6 6
Deferred taxation 18 18
Current assets 1 079 857
Inventories 479 408
Trade and other receivables 202 169
Cash and cash equivalents 392 249
Taxation receivable 6 31
Total assets 3 102 2 713
EQUITY AND LIABILITIES
Share capital and reserves 2 734 2 230
Stated capital 818 818
Non-distributable reserves 89 102
Treasury shares (461) (472)
Share option reserve 72 55
Retained earnings 2 154 1 676
Non-controlling interests 62 51
Non-current liabilities 44 12
Interest-bearing loans 29 -
Deferred taxation 15 12
Current liabilities 324 471
Trade and other payables 277 261
Provisions 43 43
Interest-bearing loans - 165
Taxation 4 2
Total equity and liabilities 3 102 2 713
Net asset value per share (cents) 296 242
Condensed statement of changes in equity
For the year ended 30 June 2015
Non- Non-
distri- Share con-
Stated butable Treasury option Retained trolling Total
(Rand millions unless otherwise stated) capital reserves shares reserve earnings Total interest equity
Balance at 30 June 2013 818 93 (474) 36 1 774 2 247 54 2 301
Profit for the year 509 509 15 524
Other comprehensive income for the year 12 12 12
Total comprehensive income for the year - 12 - - 509 521 15 536
Transfer of reserves (9) 9 - -
Dividends paid (618) (618) (13) (631)
Discontinued operations 6 6 5 11
Repurchase of non-controlling interest in subsidiary - (10) (10)
Share incentive costs (including vesting settlement) 2 19 2 23 23
Balance at 30 June 2014 818 102 (472) 55 1 676 2 179 51 2 230
Profit for the year 700 700 31 731
Other comprehensive income for the year 18 18 18
Total comprehensive income for the year - 18 - - 700 718 31 749
Dividends paid (204) (204) (8) (212)
Subsidiary transactions (31) (9) (40) (40)
Repurchase of non-controlling interest in subsidiary - (12) (12)
Share incentive costs (including vesting settlement) 11 17 (9) 19 19
Balance at 30 June 2015 818 89 (461) 72 2 154 2 672 62 2 734
Condensed Group cash flow statement
For the year ended 30 June 2015
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) 2015 2014
Cash flow from operating activities 443 (127)
Cash flow from investing activities (175) (50)
Cash flow from financing activities (125) 123
Net movement in cash and cash equivalents for the year 143 (54)
Cash and cash equivalents at the beginning of the year 249 303
Cash and cash equivalents at the end of the year 392 249
Segmental report
For the year ended 30 June 2015
Turnover Gross margin Net profit before tax
June June % June June % June June %
(Rand millions unless otherwise stated) 2015 2014 change 2015 2014 change 2015 2014 change
Retail* 4 650 3 996 16 904 812 11 232 199 17
Franchising 190 148 28
Properties 223 179 25
Supply and Support Services 1 638 1 337 23 143 127 13 276 236 17
Associates 62 29 114
Total 6 288 5 333 18 1 047 939 12 983 791 24
Franchise stores# (2 109) (1 747) 21
Consolidation entries (1 064) (872) 22 (5) (20) (75) (5) (20) (75)
Total continuing operations 3 115 2 714 15 1 042 919 13 978 771 27
Discontinued operations - 31 (100) - 11 (100) - (12) (100)
Total Group 3 115 2 745 13 1 042 930 12 978 759 29
* Includes unaudited franchise stores turnover.
# Unaudited.
Geographical analysis
(Rand millions unless otherwise stated) Inter- Dis-
South Rest of group continued
Africa Africa Other* entities Group operations
Year ended 30 June 2015
Turnover 3 863 246 70 (1 064) 3 115 -
Non-current assets 2 461 92 97 (645) 2 005 -
Year ended 30 June 2014
Turnover 3 319 197 70 (872) 2 714 31
Non-current assets 2 303 87 143 (695) 1 838 -
*Australia and Italy.
As a result of the change in the executive and the chief operating decision maker, the Group has updated the disclosures of the
previously aggregated segments to align with the information reviewed by them regularly for the purpose of allocating resources.
The Group now discloses two additional segments, Associates and Franchise Stores, which had previously not been included in the
segmental report. The prior year segmental reporting has been restated and is presented above.
Notes
1. Basis of preparation and changes in accounting policy
Basis of preparation
The Preliminary Condensed Consolidated Financial Statements for the year ended 30 June 2015 have been prepared in accordance
with IAS 34 Interim Financial Reporting, the Companies Act, 2008 (Act 71 of 2008), as amended, the SAICA Financial Reporting
Guides, as issued by the Financial Reporting Standards Council and the Listings Requirements of the JSE. The Condensed
Consolidated Financial Statements do not include all information on disclosures required in the Annual Financial
Statements and should be read in conjunction with the Group’s Annual Financial Statements as at 30 June 2015. These results
have been prepared under the supervision of Chief Financial Officer, Mr B Wood CA(SA).
New standards, interpretations and amendments adopted
The accounting policies adopted and methods of computation are in terms of International Financial Reporting Standards (“IFRS”)
and consistent with those of the previous financial year except for the adoption of new and amended IFRS and IFRIC interpretations
which became effective during the current financial year. The application of these standards and interpretations did not have a
significant impact on the Group’s reported results and cash flows for the year ended 30 June 2015 and the financial position at
30 June 2015.
2. Commitments and contingencies
As previously disclosed, legal proceedings have been instituted against Majuba Aviation Proprietary Limited, a subsidiary company
of the Group providing aircraft charter services, for which there is insurance cover.
There are no material contingent assets or liabilities at 30 June 2015 in addition to the above.
30 June 30 June
(Rand millions) 2015 2014
Capital commitments
- Contracted 176 68
- Authorised but not contracted for 197 107
Total 373 175
3. Fair values of financial instruments
The Group does not fair value its financial assets or liabilities in accordance with quoted prices in active markets or market
observables, as there is no difference between their fair value and carrying value due to the short-term nature of these items, and/or
existing terms are equivalent to market observables. There were no transfers into or out of Level 3 during the period.
4. TopT Ceramics Proprietary Limited
The Group acquired the 20% non-controlling stake held by the previous business partner of TopT Ceramics Proprietary Limited at a cost of
R11 million in the current period. A new business partner has been identified during the current period and subsequent to the
financial year end, the Group sold a 10% stake in this entity to the business partner. This stake was sold at a cost of R7 million,
and reduces the Group’s interest in this entity to 90%.
5. Italtile Mauritius Limited
Following the local establishment of a holding company regime for exchange control purposes and changes in local income tax legislation
related to taxation of royalty flows, the Group decided to liquidate its operations in Mauritius during the period. Italtile Mauritius
Limited housed the Group’s non-South African trademarks and treasury function outside of South Africa.
In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, certain accumulated exchange differences related to this
entity (recorded as foreign currency translation reserve) have been reclassified to income, resulting in a once-off gain of R19 million.
As the transaction has been accounted for as a common control transaction, foreign currency translation reserves related to foreign
investments distributed by the entity but retained by the Group are still recognised in foreign currency translation reserve.
6. SER-Export s.p.a.
During the period the Group disposed of a 20% stake in SER-Export s.p.a. to its existing partner in this entity, reducing the Group’s
effective shareholding to 30%. The disposal took place for a total cash consideration of R13 million, and has been accounted for
as a change in control from a subsidiary to an associate resulting in a fair value gain of R14 million in accordance with IFRS 10
Consolidated Financial Statements.
The carrying value of the identifiable assets and liabilities of SER-Export s.p.a. as at the date of disposal was:
Rand millions
Assets
Property, plant and equipment 7
Investments 8
Inventories 1
Trade and other receivables 24
Cash and cash equivalents 16
56
Liabilities
Trade and other payables 24
Total identifiable net assets 32
The gain on disposal is calculated as follows:
Consideration received 13
Fair value of residual value of investment 19
Foreign currency translation reserve 14
Less: Net assets disposed (32)
Total gain on disposal 14
R12 million of the gain has been realised on the disposal (R2 million remains unrealised).
7. Discontinued operations
The Group disposed of the following non-core businesses in the prior period:
- Cladding Finance Proprietary Limited - the entity used to extend and manage credit to the contractors market;
- The seven store CTM retail operation in Australia; and
- Allmuss Properties Zambia Limited - a property holding company.
The results of these businesses were thus recorded as discontinued operations in the comparative period. Cladding Finance
Proprietary Limited and Allmuss Properties Zambia Limited’s contribution to Group earnings is immaterial, although R4 million
profit was realised on the sale of the latter. The sale of the Australian retail operation was concluded via a management buyout,
and was preceded by fixed asset impairment and other rationalisation costs totalling R9 million. A further consequence of the
sale of the Australia retail operations was the derecognition of deferred taxation assets totalling R8 million, also included
in the discontinued operations results in the prior comparative period.
8. Reclassification of Australian property
Given that the Group’s property in Australia is now leased to third parties, it has been reclassified from property, plant
and equipment to investment property. The carrying value of this property is determined using the cost model per IAS 40,
Investment Property, and was R97 million at 30 June 2015.
9. Staff Share Scheme
During the prior comparative period, the Group implemented a share incentive scheme for all employees of the Group and its
franchisees that had been in the employ of the Group and/or franchise network for a period of three uninterrupted years at each
allotment date in August every year from the implementation date. As a result, 14,5 million of the Group’s shares net of
forfeitures were held by qualifying staff members at 30 June 2015 (2014: 12,6 million). Until vesting, the shares will continue
to be accounted for as treasury shares and have an impact on the diluted weighted average number of shares.
The scheme is classified as an equity settled scheme in terms of IFRS 2 Share-based Payment, and has resulted in a charge of
R12 million (2014: R17 million) to the Group’s income; R7 million (2014: R11 million) of this charge is an accelerated expense
for franchise staff.
Reviewed Audited
year to year to
30 June 30 June
2015 2014
10. Earnings per share
Reconciliation of shares in issue (all figures in millions):
- Total number of shares issued 1 033 1 033
- Shares held by Share Incentive Trust (21) (24)
- BEE treasury shares (88) (88)
Shares in issue to external parties 924 921
Reconciliation of share numbers used for earnings per share calculations
(all figures in millions):
Weighted average number of shares 923 921
- Dilution effect of share awards 11 8
Diluted weighted average number of shares 934 929
Reconciliation of headline earnings (Rand millions):
- Profit attributable to equity shareholders 700 509
- Profit on sale of property, plant and equipment (6) (8)
- Impairment of Australian property, plant and equipment - 29
- Fair value gain on SER-Export part disposal (14) -
- Reclassification of exchange difference to income (19) -
Headline earnings 661 530
Reconciliation of headline earnings for continuing operations (Rand millions):
- Profit attributable to equity shareholders 700 529
- Profit on sale of property, plant and equipment (6) (8)
- Impairment of Australian property, plant and equipment - 20
- Fair value gain on SER-Export s.p.a. part disposal (14) -
- Reclassification of exchange difference to income (19) -
Headline earnings 661 541
No adjustments to earnings are required for diluted earning per share calculations, as the share awards do not have
an impact on diluted earnings.
Registered office:
The Italtile Building, cnr William Nicol Drive and Peter Place, Bryanston (PO Box 1689, Randburg 2125)
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107)
Executive directors:
N Booth (Chief Executive Officer), B G Wood (Chief Financial Officer), J N Potgieter (Chief Operating Officer)
Non-executive directors:
G A M Ravazzotti (Non-executive Chairman), S M du Toit, S I Gama, N Medupe, S G Pretorius, A Zannoni* (*Italian)
Company Secretary: E J Willis Sponsor: Merchantec Capital Auditors: Ernst & Young Inc.
www.italtile.com
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