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(ITLTILE) (ITE) (ISIN: ZAE 000003679)
Audited group results for the year ended 30 June 2001
COMMENTARY
Italtile Limited has succeeded in delivering its tenth consecutive year of
turnover and earnings improvement. The group (including franchised
operations) reported an improvement in turnover of 27% to R788 million
(2000: R619 million). Like-for-like, turnover growth from group-owned stores
was 20% this year, as a further three group-owned operations were franchised
in line with company strategy. Operating profit rose 27%, from R64 million
to R82 million while headline earnings per share increased by 24% to 317
cents per share (2000: 254 cents per share). The group remains ungeared.
Despite adverse trading conditions, Italtile retained its position as market
leader and as the largest purchaser of ceramic tiles in the world. This
status enabled the company to continue to source product internationally at
very competitive prices, notwithstanding the unfavourable exchange rate.
The period under review saw the group pursuing its objectives of aggressive
cost control and improved margins. Stock management was prudent in the light
of a depreciating currency and a growing business.
The group's trend to position itself as a major franchisor was consolidated
with several key developments:
- The company will shortly introduce its first Italtile franchise and plans
to expand this division significantly. With its extensive experience in
franchising CTM stores, the group is confident that the Italtile franchise
model will be as successful as its sister operation.
- Having established itself as a leading franchisor, the company is
implementing an advanced element to the existing franchise model, which
provides for a joint venture arrangement between the company and the
franchisee. This model has several benefits, including encouraging
entrepreneurship while protecting the company's income, and improving
accessibility to financing for entrepreneurs.
- The group has launched an empowered-franchise concept, comprising 50/50
partnerships between franchisees and black partners. The intention is to
increase black ownership, while ensuring mentoring and skills transfer. This
new division targets rural areas, bringing the CTM brand directly into the
heart of the community. To date such stores have been opened in Chamdor and
Groblersdal. It is anticipated that further stores will be trading by June
2002.
- The successful introduction of an ERP system (SAP R3) has provided a
platform for the organisation which enables a more efficient response to
customers' needs.
- The group invested a further R31 million in fixed property during the year
under review, bringing the value of the property portfolio to R162 million.
SOUTHERN AFRICAN OPERATIONS
Pleasing growth was reported by both divisions, CTM and Italtile. The
company now trades out of 15 group-owned CTM stores, 43 franchised CTM
stores and 11 Italtile stores.
Expansion into Africa will be cautious, with opportunities currently being
explored in Zambia and Malawi.
INTERNATIONAL OPERATIONS
Six additional CTM stores have been opened in Australia over the past
financial year, bringing the total to nine stores across three states.
Having achieved this satisfactory presence, and in line with the company's
conservative expansion policy, focus will be on consolidating the brand's
current presence, with only two further new stores planned in the short
term. Expansion has been and will continue to be funded through company
reserves.
The company has invested heavily in marketing in order to establish the CTM
brand in previously untraded states and expects that the loss shown as a
result of these set-up costs should be reversed in financial year 2002. The
company remains positive about its investment in Australia.
DIRECTORATE
After two and a half years as Chief Executive Officer, and with the ongoing
expansion of the company both locally and internationally and the attendant
financial demands arising from that growth, Peter Swatton elected to
relinquish his position and resume his former role as Chief Financial
Officer. Gianni Ravazzotti, founder of the company and Executive Chairman,
will fill the position of CEO for an interim period until such time as a
replacement for Swatton is appointed.
PROSPECTS
The Board believes that with continued store expansion, focus on cost
control and improved margins the group will maintain a steady growth
performance. The Board perceives particularly attractive growth
opportunities afforded by the newly launched empowered-franchise vehicle.
ACCOUNTING POLICIES
The accounting policies applied have been consistent with those of the prior
year.
DIVIDEND
The Board has declared a final dividend of 31 cents, which together with the
interim dividend of 29 cents produces a total dividend of 60 cents (2000: 54
cents), an 11% improvement. The group will retain its dividend cover at
approximately five times.
For and on behalf of the Board
G.A.M. Ravazzotti
Chairman
P.D. Swatton
Chief Financial Officer
14 August 2001
DIVIDEND ANNOUNCEMENT
The directors have resolved to declare a final dividend (number 70) of 31
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 31 August 2001. The share of Italtile Limited
will commence trading "EX" dividend from the commencement of business on
Monday, 3 September 2001 and the record date will be Friday, 7 September
2001 and will be paid on Friday, 5 October 2001.
STRATE
Shareholders were advised in the interim profit announcement dated 13
February 2001, that the company had been notified by the JSE Securities
Exchange to transfer its share capital to the electronic Share Transactions
Totally Electronic (STRATE) environment as from 23 April 2001. Italtile's
subsequent dematerialisation programme has progressed very well, with a
dematerialisation figure of 95,94% achieved to date. Shareholders are
thanked for their co-operation in this regard. Those shareholders who have
as yet not deposited their shares with a CSDP or qualifying stockbroker are
reminded to do so. Enquiries in this regard are referred to STRATE on 0800
004 727.
(Rand 000's unless otherwise stated)
Abridged group income statements
Audited Audited
year to year to
30 June 30 June %
2001 2000 Increase
Turnover
- By group owned stores 455 329 422 534 +7,8
- By franchise owned stores
(unaudited) 332 595 197 259 +68,6
TOTAL 787 924 619 793 +27,1
Trading profit before depreciation 88 852 70 504 +26,0
Depreciation (6 497) (5 758)
Trading profit 82 355 64 746 +27,2
Interest received 1 983 2 813
Profit on sale of subsidiary 0 1 738
Profit on sale of fixed property 568 943
Profit before taxation 84 906 70 240 +20,9
Taxation (27 307) (20 046)
Profit after taxation 57 599 50 194 +14,8
Outside shareholders' interest 1 011 (848)
Earnings attributable to ordinary
shareholders 58 611 49 346 +18,8
Number of shares in issue (000's) 18 311 18 311
Earnings per share (cents) 320,1 269,5 +18,8
Headline earnings per share (cents) 317,0 254,8 +24,4
Dividends per share (cents) 60,0 54,0 +11,1
RECONCILIATION OF HEADLINE EARNINGS
Earnings attributable to ordinary
shareholders 58 611 49 346
Profit on sale of fixed property (568) (943)
Profit on sale of subsidiary - (1 738)
Headline earnings 58 043 46 665
Cash flow statement
Audited Audited
year to year to
30 June 30 June
2001 2000
Cash flows from operating activities 56 401 66 114
Trading adjusted for non-cash items 94 265 70 512
Working capital movements (7 400) 20 764
Cash generated from operations 86 865 91 276
Interest received 1 983 2 813
Dividends paid (10 907) (8 073)
Taxation paid (21 540) (19 902)
Investing activities (47 362) (54 708)
To expand operations (33 328) (43 354)
To maintain operations (14 034) (11 354)
Investment of minorities in Italtile Australia 5 865 848
Net movement in cash and cash equivalents 14 904 12 254
Cash and cash equivalents at beginning
of period 31 756 19 502
Cash and cash equivalents at end of period 46 660 31 756
Abridged group balance sheets
Audited Audited
year to year to
30 June 30 June
2001 2000
ASSETS
Non-current assets 209 089 170 423
Fixed assets 189 984 149 934
Long-term assets 19 105 20 489
Current assets 177 131 115 910
Inventories 89 894 63 532
Trade and other receivables 40 577 20 622
Cash and cash equivalents 46 660 31 756
Total assets 386 220 286 333
EQUITY AND LIABILITIES
Capital and reserves 227 714 178 826
Stated capital 18 457 18 457
Non-distributable reserve 1 436 47
Retained profit 207 821 160 322
Outside shareholders' Interest 7 053 2 199
Non-current liabilities 8 073 5 140
Deferred tax 985 938
Long-term liabilities 4 143 -
Provision for warranties 2 945 4 202
Current liabilities 143 380 100 168
Trade and other payables 123 355 86 068
Taxation 14 224 8 503
Shareholders for dividends 5 801 5 597
Total equity and liabilities 386 220 286 333
REGISTERED OFFICE The Italtile Centre, cnr Peter Place Road and William
Nicol, Bryanston (PO Box 1689 Randburg 2125)
TRANSFER SECRETARIES Computershare Services Limited, Edura, 41 Fox Street,
Johannesburg 2001 (PO Box 61051, Johannesburg 2107)
DIRECTORS G A M Ravazzotti (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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