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ITALTILE LIMITED - INTERIM PROFIT ANNOUNCEMENT
ITALTILE Limited
(Incorporated in the Republic of South Africa)
(Registration number 1955/000558/06)
(ITLTILE) SHARE CODE ITE ISIN: ZAE000003679
Unaudited group results for the six months ended 31 December 2002
INTERIM PROFIT ANNOUNCEMENT
COMMENTARY
For the six months ended 31 December 2002, turnover for Italtile Limited and its
franchisees amounted to R725 million, an improvement of 36% (2001: R533
million): the contribution from group owned stores improved 33% to R407 million
(2001: R306 million), while turnover from franchises grew 40% to R317 million
(2001: R227 million). Trading profit increased to R78 million from R50 million
in the prior comparable period, an improvement of 56%. Attributable earnings
grew 53% to R53,5 million (2001: R35 million), while headline earnings per share
increased 52% to 291 cents (2001: 191 cents).
Italtile Limited is South Africa`s leading retailer of ceramic tiles,
sanitaryware, bathroom accessories and other related products, and trades
through two national branded retail chains, CTM and Italtile, which cater to the
value-for-money and premium-end markets respectively. The company is amongst the
largest purchasers of tiles globally.
Central to the achievement of these results are the group`s key competitive
strengths:
* Strong brand awareness and responsiveness to consumer demand;
* Advantageous store location on company owned premises;
* Leverage to source and buy superior quality product at competitive prices;
* Strategic partnerships throughout the supply chain which energise the trading
model;
* Contributing to performance improvement was the buoyant trading environment,
complemented by the current surge in the building industry.
Turnover growth was derived from existing operations, with only one new store,
the Lonehill Super Store, having been opened during this review period. This
performance substantiates management`s view that the South African ceramic tile
market still affords significant growth opportunities in both the developed and
undeveloped sectors.
The period under review featured some important developments, including the very
successful performance of the group`s joint venture enterprises. The company`s
strategic imperative to empower and energise individuals at every level of the
business is accomplished by decentralising decision making, and fostering
entrepreneurship by encouraging the development of a successful retail formula
at store level. This philosophy has been positively received, and together with
the motivation characteristic of an owner-driven business, has produced
rewarding returns.
Inroads were made into the sanitaryware and tap market, with gains reported in
sales and market share. This associated-product market has traditionally been
regarded by the group as peripheral, rather than a core focus area, but with
evolving consumer appetite demanding improved convenience and a wider product
range, the synergies have become increasingly attractive.
Important opportunities have been identified and growth is forecast for this
business segment. Management is confident that the group`s status as the leading
tile retailer can be replicated in the tap and sanitaryware market.
PROPERTY PORTFOLIO
A further R16 million was invested in the property portfolio, increasing the
total carrying value to R228 million. The group`s policy of trading out of
company-owned premises which are situated in highly visible, prime locations
positioned to support group brands has continued to deliver important benefits.
As a consequence, ongoing investment in this portfolio will be made.
AFRICAN OPERATIONS CTM AND ITALTILE
The group operates three franchise-linked vehicles: 100% franchises, joint
venture franchises and black empowered franchises.
The CTM brand is represented by eight company owned stores, 51 franchised
stores, five empowered franchise stores and nine joint venture stores in South
Africa. CTM is also presently represented in Botswana, Namibia, Swaziland,
Lesotho, Malawi and Tanzania. Expansion plans include a second store in both
Malawi and Tanzania, and the commencement of trading in Zambia within the next
few months.
Italtile is represented by seven company owned stores, one franchised store, and
three joint venture stores in South Africa.
This review period saw the joint venture structure coming into its own as a
result of the successful combination of complementary factors: a careful
selection process, ensuring the right match of franchisee and customer profile,
entrepreneurial commitment of franchise owners, and the mentorship and
experience added by the company. Given the success of this trading formula, the
balance of group owned stores will be joint ventured in time.
The empowerment franchise vehicles also performed well, incentivising the group
to consider opening a further three stores in heavily populated areas. With
skills transfer and mentoring taking place at the coalface and benefits flowing
through to SME`s, management is satisfied that the group`s black economic
empowerment programme is firmly on track.
Having established itself as a major franchisor the company`s goal is to ensure
that the bulk of the business vests in the hands of franchisees.
INTERNATIONAL OPERATIONS
The Australian operations continued to perform well, growing both turnover and
profits. The group is represented by nine CTM stores across Queensland, New
South Wales and Victoria. In line with Australian consumer retail expectations,
stores will be upgraded over time to afford an aesthetically enhanced shopping
experience. Further expansion will commence once the store upgrade programme has
been completed. The group`s Italian operation continues to add value and has
performed in line with expectations.
DIRECTORATE
During the period under review, Mr Brian van Rooyen resigned his position as a
non-executive director of the Board to devote more time to the company of which
he is Chief Executive Officer. The Board wishes to thank Mr van Rooyen for his
valuable contribution.
ISSUE OF SHARES
On 18 November 2002, the Group issued 366 541 shares at 2400 cents each to the
Share Incentive Trust in order to eliminate the exposure on the loan owed by the
Trust to the group. This brings the total number of shares in issue to 18 396
401. Share issue expenses have been capitalised.
PROSPECTS
Trading conditions are expected to remain favourable over the next 12 months.
While expansion opportunities afforded by the market will facilitate further
store openings during the coming year, the group remains cognisant that to
support these stores the market needs to be created and nurtured. Attention will
thus be directed at sourcing and training suitable partners and franchisees to
exploit untapped markets where brand recognition is already strong.
Management is satisfied that with continued focus on key performance areas
steady growth and satisfying returns are achievable.
ACCOUNTING POLICIES
The financial information has been presented in accordance with South African
Statements of Generally Accepted Accounting Practice. The accounting policies
applied are consistent with those of the prior reporting period, with the
exception of the adoption of AC133 "Financial Instruments Recognition and
Measurement".
DIVIDEND
The Board has declared an interim dividend of 50 cents, an improvement of 43%
(2001: 35 cents).
DIVIDEND ANNOUNCEMENT
The directors have declared an interim dividend (number 73) of 50 cents per
share to all shareholders recorded in the books of Italtile Limited. The last
day to trade "CUM" the dividend in order to participate in the dividend will be
Friday 21 February 2003. The shares of Italtile Limited will commence trading
"EX" dividend from the commencement of business on Monday 24 February 2003 and
the record date will be Friday 28 February 2003. Payment will be made on Monday
3 March 2003. Share certificates may not be dematerialised or rematerialised
between Monday 24 February 2003 and Friday 28 February 2003, both days
inclusive.
For and on behalf of the Board
G.A.M. Ravazzotti P.D. Swatton
Executive Chairman Chief Financial Officer
5 February 2003
(Rand 000`s unless otherwise stated)
Abridged group income statements
Unaudited Unaudited Audited
6 months to 6 months to year to
% In- 31 December 31 December 30 June
crease 2002 2001 2002
Turnover
- By group owned stores 407 324 305 990 619 812
- By franchise owned
stores 317 389 227 162 469 797
TOTAL 35,9 724 713 533 152 1 089 609
Trading profit before
depreciation 84 568 56 033 140 841
Depreciation (6 396) (5 923) (11 586)
Trading profit 56,0 78 172 50 110 129 255
Interest received 1 179 1 005 3 129
Dividends received 938 572
Profit before
taxation 57,1 80 289 51 115 132 956
Taxation (25 475) (15 781) (36 565)
Profit after
taxation 55,1 54 814 35 334 96 391
Outside shareholders`
interest (1 293) (314) (1 476)
Earnings attributable
to ordinary
shareholders 52,8 53 521 35 020 94 915
Weighted average
number of shares in
issue (000`s) 18 396 18 311 18 311
Earnings per
share (cents) 52,1 290,9 191,3 518,3
Headline earnings
per share (cents) 52,1 290,9 191,3 518,3
Dividends declared
per share (cents) 42,9 50,0 35,0 100,0
Abridged group cash flow statement
Unaudited Unaudited Audited
6 months to 6 months to year to
31 December 31 December 30 June
2002 2001 2002
Cash flow from operating
activities 41 223 79 055 97 925
Trading adjusted for
non-cash items 78 519 66 331 150 573
Working capital movements 7 172 40 268 (14 209)
Cash generated from
operations 85 691 106 599 136 364
Investment income 2 117 1 005 3 701
Dividends paid (11 902) (5 676) (12 209)
Taxation paid (34 683) (22 873) (29 931)
Investing activities (37 935) (41 574) (59 456)
To expand operations (15 844) (37 459) (51 090)
To maintain operations (22 091) (4 115) (8 366)
Increase in issued share
capital 8 717
Decrease in long term
liabilities (1 001) 8 036 6 649
Net movement in cash
and cash equivalents 11 004 45 517 45 118
Cash and cash equivalents
at beginning of period 91 778 46 660 46 660
Cash and cash equivalents
at end of period 102 782 92 177 91 778
Abridged group balance sheets
Unaudited Unaudited Audited
6 months to 6 months to year to
31 December 31 December 30 June
2002 2001 2002
ASSETS
Non-current assets 288 627 244 573 256 959
Fixed assets 251 042 220 149 232 008
Long-term assets 37 585 24 424 24 951
Current assets 290 202 231 696 300 853
Inventories 117 272 88 294 144 131
Trade and other receivables 70 148 51 225 64 944
Cash and cash equivalents 102 782 92 177 91 778
Total assets 578 829 476 269 557 812
EQUITY AND LIABILITIES
Capital and reserves 370 241 273 302 325 953
Stated capital 27 174 18 457 18 457
Non-distributable reserve 5 120 11 879 11 168
Retained profit 337 947 242 966 296 328
Outside shareholders`
interest 9 950 7 367 8 529
Non-current liabilities 10 542 16 108 11 543
Deferred tax 1 403 984 1 403
Long-term liabilities 6 194 12 179 7 195
Provision for warranties 2 945 2 945 2 945
Current liabilities 188 096 179 492 211 787
Trade and other payables 176 864 172 361 191 347
Taxation 11 232 7 131 20 440
Total equity and liabilities 578 829 476 269 557 812
Net asset value per
share (cents) 2 067 1 497 1 827
Statement of changes in equity
Non-
distri-
Stated butable Retained
capital reserve profit Total
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
New share issues 8 717 8 717
Net profit for
the period 53 521 53 521
Dividends paid (11 902) (11 902)
Currency translation
difference (6 048) (6 048)
Balance at 31
December 2002 27 174 5 120 337 947 370 241
Segmental reporting
Properties
and
Retail Franchising Corporate Group
Period to December 2002
Turnover 407 324 317 389 724 713
Segment results 52 261 23 219 4 809 80 289
Period to December 2001
Turnover 305 990 227 162 533 152
Segment results 33 228 16 902 985 51 115
REGISTERED OFFICE
The Italtile Centre, cnr Peter Place and William Nicol, Bryanston (PO Box 1689
Randburg 2125)
TRANSFER SECRETARIES
Computershare Services Limited,
70 Marshall Street, Johannesburg 2001 (PO Box 61051, Johannesburg 2107)
DIRECTORS
G A M Ravazzotti (Chairman), P D Swatton**,
J Couzis*, G Cousins, D H Rabin, *Greek **British
Refer to Italtile`s corporate website at www.Italtile.com
Date: 05/02/2003 09:00:00 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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