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Italtile Limited Results for the year ended 30 June 2016
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 2016 and dividend declaration
- System-wide turnover
R5,96 billion
2015: R5,22 billion
- Earnings per share
87,8 cents
2015: 75,9 cents
- Trading profit
R1 047 million
2015: R905 million
- Total ordinary dividend per share
29 cents
2015: 25 cents
Commentary
Overview for the year ended 30 June 2016
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 146 stores in Southern and East Africa. The brand offering targets homeowners
across the LSM categories 4 to 10.
The retail operation is strategically supported by a vertically integrated Supply Chain, investments in key suppliers,
and an extensive property portfolio.
The Group’s overriding goal is to be the first-choice retailer in its market segment, by offering an unrivalled
shopping experience for customers. This ambition is underpinned by the retail excellence strategy, “right product, at the
right time, place and price”. To achieve this, management is cognisant that all components of the business model: the retail
brand operations and the Support and Supply Chain businesses, need to operate at their peak and interface flawlessly.
At the end of the prior reporting period, management stated that there was clarity of strategy and structure across
the organisation, and opportunities for growth in the year ahead were identified both within the business and outside of
it:
- Internally, the Business Optimisation Programme (“BOP”) would be rolled out from the Supply Chain businesses to the
retail brand operations. Focus would be on improving retail excellence and in-store execution, honing the human capital
portfolio, and enhancing analysis of the Group’s value proposition and its trading intelligence. Further investment
would be made in systems, technology and personnel to meet the programme’s goals.
- Externally, the Group would expand its retail footprint across all three brands, Italtile Retail, CTM and TopT, to
build on the steady growth in market share which the company had gained over recent years.
Benchmarked against these goals, management is pleased to report that the business delivered in line with
expectations.
BOP was entrenched in the retail operations and started to record notable improvements in key areas, including stock
management (availability, range and price matrix, and stock turn); the personnel complement (which was better aligned
with the Group’s growth targets through improved recruitment and training); and information technology (IT) and e-commerce
(capitalising on trading intelligence and developing a seamless shopping experience across sales platforms).
In terms of expanding the retail footprint, the Group opened 20 new stores during the reporting period: 15 TopTs,
three CTMs and two Italtile Retail stores, and launched a CTM web store in Kenya. Particular emphasis was placed on
introducing flexible store formats to align each offering optimally with its respective market; this flexibility enabled
the Group to gain market share in existing and new markets.
Trading environment
While the renovations market grew during the reporting period, the new-build segment remained sluggish, illustrated by
the negligible increase in the number of building plans passed. This statistic reflects the deterioration in consumers’
investment sentiment based on uncertainty in the economy and socio-political environment, with homeowners more likely
to upgrade existing properties than commit to more substantial new-build spend.
Across the industry, competitor activity intensified, featuring aggressive pricing and promotions as traders sought to
retain market share. Currency volatility and cash flow constraints led to further rationalisation of less established
operators. In this context, the Group benefited from its solid balance sheet and integrated Supply Chain which ensured
consistent availability of high-quality reputable brands and stable pricing.
Results
The Group reported improved results in each of the retail brands, as well as in all its Support and Supply Chain
businesses.
The gratifying performance recorded for the year is attributable to continued expansion of the BOP across key areas of
the Group, which facilitated further improvements within the business and a meaningful gain in market share from
competitors.
While 20 new stores were opened in the review period, their full contribution to revenue will only be reflected in the
following six months.
Financial highlights
System-wide turnover increased 14% to R5,96 billion (2015: R5,22 billion), while like-on-like revenue at the retail
store level also grew 14%.
Trading profit rose 16% to R1,047 million (2015: R905 million), while margins firmed, primarily due to a decline in
overhead expenses derived from improved management of utilities, efficiencies gained across the back-end Support Service
functions and containment of freight and distribution costs. Average price inflation was 6,5%.
The Group’s basic earnings per share (“EPS”) rose 16% to 87,8 cents (2015: 75,9 cents), while headline earnings per
share (“HEPS”) increased 21% to 86,9 cents (2015: 71,6 cents).
Earnings growth includes the impact of the following:
- The increased contribution of R95 million (2015: R62 million) to Group profit from associates Ceramic Industries
Proprietary Limited (“Ceramic”) and Ezee Tile;
- Net finance income of R23 million (2015: R11 million) attributable to improved average net cash holdings of the
Group;
- A normalisation of the effective taxation rate as non-recurring taxation benefits were recorded in the previous
corresponding period;
- The absence of once-off gains of R33 million (adjusted for in headline earnings) reported in the previous
corresponding period derived from:
- the reclassification 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 (gain of R14 million); and
- 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 (gain of R19 million).
Inventories rose to R693 million (2015: R479 million) to meet growing demand from the existing retail operation as
well as the new stores added to the network during the period. The increase also reflects the weakening of the Rand which
impacted the landed cost of imported inventory in the Supply Chain businesses, as well as the introduction of the shower
enclosure merchandise category into the operation. Stock management remained a core discipline across the business, with
improved stock turn and reduced stock losses being key performance indicators.
Capital expenditure for the period was R375 million (2015: R219 million), incurred primarily on acquisitions and
upgrades of properties in the Group’s Property Investment portfolio to support the business’s expansion programme.
Dividend payments totalled R279 million (2015: R212 million), resulting in net cash reserves of R347 million
(2015: R392 million) at the end of the period.
The Group’s net asset value was 362 cents per share (2015: 296 cents per share).
Operational review
Retail brands
Improved performances were reported by the Group’s retail operation, comprising Italtile Retail, CTM and TopT, with
each brand recording double-digit sales growth and a gain in market share across its trading regions and merchandise
categories.
Italtile Retail
Italtile Retail grew sales and profits. These results were primarily attributable to improved responsiveness to customer
demand with the extension of the bathroom accessories, furniture and cladding categories, as well as wider ranges of
highly fashionable large format tiles. The brand continued to benefit from its status as a purveyor of environmentally
sensitive brassware (Tivoli and Idral) and sanitaryware (Laufen) products.
Margins remained stable as a function of an improved product/price matrix, enhanced efficiencies and intensified cost
containment measures.
During the period, two new-generation stores were opened - in Northriding and Waterfall (Gauteng), and the Somerset
West (Western Cape) store was comprehensively rebuilt. These stores showcase the brand’s improved retail formula in terms
of customer-centricity, and entrench Italtile’s standing as the leading trendsetter in the home improvement market. All
three stores have been well received, and served to drive sales and market share gain during the period.
The brand’s e-commerce web store, launched in 2015, continued to be upgraded to meet increased demand from customers
as the offering gained traction, while the bespoke online I-Spec application, designed to develop unique specifications
for individual projects, grew its appeal with clients, demonstrating the strategic value this tool has for the business.
CTM
During the year under review, management continued to implement measures to realise CTM’s goal of establishing sales
and customer service as core, defensible competencies and capabilities.
The brand recorded an improved quarter-on-quarter performance, with a strong final quarter. Results for the year
reflect good organic sales growth and an increase in profits. The average basket grew in value, although margins declined
very slightly, primarily a function of the deliberate strategy to retain key price points in the tile category to anchor
the brand’s competitive value positioning.
The business’s improvement over the year is based on sustained efforts to grow sales and gain market share through
improved execution and operational effectiveness, manifested through improved stock-turn and in-stock levels of business
critical products; enhanced product innovation and range development; and an increased and concentrated marketing effort
at a national and local level.
Three new stores were launched, in Mitchells Plain (Western Cape), Hazyview (Mpumalanga) and Waterfall (Gauteng)
during the year. The Waterfall flagship “Millennial” store is a new generation concept, which while retaining CTM’s
heritage, features a more contemporary design and customer-centric technology aimed at improving the shopping experience.
The brand’s web store also continued to gain traction with customers, illustrated by good growth in total user
sessions and an increase in online sales.
TopT
TopT opened 15 new stores, to bring the total network to 50 stores and extend the brand’s footprint to eight provinces
across the country.
Turnover and profit increased in line with targets, and margins improved slightly as a function of an enhanced
product/price mix. The brand gained market share in both its existing and new markets, attracting a wider audience of
consumers based on its improved range and growing appeal to a new segment of cost-conscious shoppers seeking quality
value offerings in the difficult economic climate.
Other factors underpinning the brand’s growth is its focus on delivering consistent, large volumes of affordable,
aspirational and accessible products in a market segment that has traditionally been informal, costly and poorly organised,
as well as its flexibility to adapt to new home improvement trends by introducing innovative products and categories as
demand emerges.
Fifteen stores are planned for opening in the forthcoming financial year in order to extend the brand’s network in the
Free State and establish a footprint in the Western Cape.
Supply Chain
The Group’s vertically integrated Supply Chain performs a key strategic support function for the retail brand
operations through ensuring consistent availability of the right product at the right time, place and price. The Supply
Chain’s component businesses are: International Tap Distributors (importer of brassware and accessories), Cedar Point
(importer of laminate flooring, bathroom furniture, shower enclosures, decor and other home-finishing products) and
Distribution Centre (importer of polished and glazed porcelain). Each of these businesses reported increased sales and
profitability, driven by strong demand from the store network across the retail brands. In the context of currency
volatility, a tactical decision was taken to contain price increases to support the Group’s competitive offering, which
created margin pressure.
Investment in associates
Ceramic Industries
Italtile holds a 20% strategic stake in manufacturer, Ceramic, the Group’s primary supplier of tiles, sanitaryware and
bathware. This tactical investment is significant in underpinning Italtile’s growth agenda.
Improved results were reported by Ceramic’s South African and Australian tile plants and the local sanitaryware
factory. This performance is attributable to higher production volumes, which led to better capacity utilisation and
enhanced efficiencies.
During the review period, the business launched its new Gryphon plant, which manufactures large format glazed porcelain
tiles that compete favourably with high-quality imported product. Market response to the range has been very positive.
Gryphon’s impact on turnover is expected to grow materially over time.
Ceramic’s contribution to Group profit for the period rose 51% to R83 million (2015: R55 million).
Offer to acquire shares in Ceramic
Further to the SENS announcements published on 8 April 2016, 26 April 2016, 9 June 2016 and 20 July 2016, Italtile
submitted a binding offer on 15 July 2016 to Ceramic, to acquire up to a further 73,5% of the company’s issued share
capital (“the Acquisition”). The balance of 6,5% comprises treasury shares held by National Ceramic Industries South
Africa and a subsidiary of Italtile.
In terms of the Acquisition, the purchase consideration equates to R3,4 billion and will be settled in cash (50%) and
the balance by the issue of Italtile shares at R11,57 per share. Post the Acquisition, Italtile will offer a total of
approximately 227,3 million rights offer shares to ensure equitable treatment of all shareholders and afford minority
shareholders the opportunity to avoid dilution of their shareholding as a result of the Acquisition. A total of 22 shares
will be offered for every 100 shares held in Italtile at a subscription price of R11,57 per rights offer share.
A further consequence of the Acquisition will be an increase in the Group’s total effective holding in Ezee Tile to
68,95%.
Italtile’s rationale for acquiring Ceramic is based on management’s positive view of opportunities for growth in this
country, and the benefits of this transaction for both Italtile and Ceramic, which are far-ranging:
- The long-term success and sustainability of both businesses are inextricably intertwined and have been for the past
two decades.
- The combination and integration of the two management teams will add depth in terms of experience and skill in the
business, and enhance the management structure to facilitate improved succession planning at the combined group level.
- Both businesses will benefit from shared access to better, real-time market intelligence, improved efficiencies and
reduced costs, enhanced allocation of capital, and alignment of long-term growth strategies, thereby fostering
sustainable returns for shareholders.
The Acquisition is subject to attainment of certain conditions precedent, and approval from competition authorities
and Italtile shareholders. Shareholders will continue to be apprised of progress and are referred to the SENS
announcements published on 20 July 2016, 28 July 2016, 11 August 2016 and the acquisition circular distributed to
shareholders on 23 August 2016 for further detail.
The matter is tabled for discussion at the general meeting to be held on 21 September 2016.
Ezee Tile
The Group holds an effective 46% stake in Ezee Tile, a national manufacturer of grout, adhesive and related products.
As noted above, a consequence of Italtile acquiring Ceramic will be an increase of the Group’s total effective holding
in Ezee Tile to 68,95%.
Ezee Tile’s business-wide restructuring programme implemented over the past two years continued to deliver projected
results, harnessing further efficiencies in the factories. Sales volumes to the Group and open market clients grew, and
the business contributed R12 million (2015: R7 million) to Group profits, an improvement of 71% over the prior
comparative period.
Property investment portfolio
The Group’s property portfolio affords strategic advantage to the retail brand operations by ensuring stores are easily
accessible, well presented and maintained, and contribute to an aspirational shopping experience. The portfolio is
continuously evaluated and enhanced to ensure optimal returns.
During the reporting period, good progress was made in terms of securing and developing a pipeline of properties to
meet the Group’s robust expansion programme.
As at 30 June 2016, the portfolio had an estimated market value of R2,4 billion (2015: R2,0 billion). In the year under
review, R284 million (2015: R164 million) was invested in an ongoing store upgrade programme and the acquisition of
seven properties. Across the Group, 20 new stores were opened, comprising 15 new TopTs, three CTMs and two Italtile Retail
stores.
Flexibility of the property development model will be a key watchword in the forthcoming year, both in terms of store
size format, and ownership and/or rental of properties as appropriate.
Management’s stated intention over the past several years has been to dispose of its Australian property holding
company when market conditions improve. During the reporting period, a buyer was identified for the business which comprises
four retail properties. The transaction should be concluded during the first half of the new financial year.
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, an allotment of 3,1 million shares (2015: 3,6 million shares)
was allocated to 161 eligible employees of the Group and franchisees (2015: 171 employees).
Prospects
Prevailing economic and socio-political conditions are unlikely to improve materially in the forthcoming year. In this
context, consumers will continue to allocate their discretionary spend cautiously, seeking out optimal value/quality
offerings. While the home improvement segment of the construction industry is expected to continue to grow, forecasts for
increased new build activity are less positive. Furthermore, competition in the market will intensify, as participants
strive to retain and gain market share.
Faced with these trading conditions, management is emphatic that, to sustain results at current levels, opportunities
for growth must be realised within the business.
In this regard, the following priorities have been identified:
- Ensure that the business is steeped in the principles of retail excellence as a standard throughout the organisation.
This includes continuing to entrench BOP, enhance training and recruitment practices; better measurement of trading
intelligence; and management of performance in the drive to deliver a peerless offering to customers;
- Continue to expand the Group’s store network, including opening 15 TopT stores in the year ahead and more CTM and
Italtile stores in the following year;
- Capitalise on opportunities to gain market share from imported product through Gryphon’s highly acclaimed glazed
porcelain tile ranges;
- Leverage growth levers in the Supply Chain, in particular improving logistics and distribution;
- Continue to invest in information technology and e-commerce to keep abreast of opportunities in that rapidly
changing environment; and
- Assuming the successful conclusion of the Group’s acquisition of Ceramic Industries, integrate the IT platform of
that business and the Ezee Tile operation as seamlessly as possible into its own.
Subsequent events
No events, other than those disclosed in the notes 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
15,0 cents per share (2015: 13,0 cents per share), which together with the interim gross cash dividend of 14,0 cents
per share (2015: 12,0 cents per share), produces a total gross cash dividend declared for the year ended 30 June 2016 of
29,0 cents per share (2015: 25,0 cents per share), an increase of 16%.
Dividend announcement
The Board has declared a final gross cash dividend (number 100) for the year ended 30 June 2016 of 15,0 cents per
ordinary share to all shareholders recorded in the books of Italtile as at the record date of Friday, 16 September 2016.
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 15,00000 cents per share for shareholders exempt from the dividends tax.
- The net local dividend amount is 12,75000 cents per share for shareholders liable to pay the dividends tax.
- The local Dividend Withholding Tax amount is 2,25000 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 19 533 492 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 Tuesday, 13 September 2016. The
shares will commence trading ex-dividend from the commencement of business on Wednesday, 14 September 2016 and the record
date will be Friday, 16 September 2016. The dividend will be paid on Monday, 19 September 2016. Share certificates may
not be rematerialised or dematerialised between Wednesday, 14 September 2016 and Friday, 16 September 2016, 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
Sponsor 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 2016 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
24 August 2016
System-wide turnover analysis
For the year ended 30 June 2016
Reviewed Audited
year to year to
% 30 June 30 June
(Rand millions unless otherwise stated) increase 2016 2015
Group and franchised turnover
- By Group owned stores and entities 3 539 3 115
- By franchise owned stores (unaudited) 2 416 2 109
Total 14 5 955 5 224
Store network
At 30 June 2016
2016 2015
Region Franchise Corporate Total Franchise Corporate Total
South Africa
- Italtile - 11* 11 - 9* 9
- CTM 28 41* 69 32 34* 66
- TopT 37 13 50 29 6 35
Rest of Africa 9 7* 16 10 6 16
74 72 146 71 55 126
*Includes web store.
Condensed Group statements of comprehensive income
For the year ended 30 June 2016
Reviewed Audited
year to year to
% 30 June 30 June
(Rand millions unless otherwise stated) increase 2016 2015
Turnover 3 539 3 115
Cost of sales (2 117) (1 911)
Gross profit 18 1 422 1 204
Other operating income 342 330
Operating expenses (728) (636)
Profit on sale of property, plant and equipment 11 7
Trading profit 16 1 047 905
Financial income 25 17
Financial cost (2) (6)
Profit from associates - after tax 96 62
Profit before taxation 19 1 166 978
Taxation (315) (247)
Profit for the year 16 851 731
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation difference 25 21
Other comprehensive income/(loss) from associates 8 (3)
Total comprehensive income for the year 18 884 749
Profit attributable to:
- Equity shareholders 813 700
- Non-controlling interests 38 31
16 851 731
Total comprehensive income attributable to:
- Equity shareholders 846 718
- Non-controlling interests 38 31
18 884 749
Earnings per share (all figures in cents):
- Earnings per share 16 87,8 75,9
- Headline earnings per share 21 86,9 71,6
- Diluted earnings per share 15 86,4 75,0
- Diluted headline earnings per share 21 85,5 70,8
Condensed Group statements of financial position
As at 30 June 2016
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) 2016 2015
ASSETS
Non-current assets 2 309 2 023
Property, plant and equipment 1 594 1 296
Investment property - 97
Investment in associates 674 591
Long-term assets 15 15
Goodwill 6 6
Deferred taxation 20 18
Current assets 1 365 1 079
Inventories 693 479
Trade and other receivables 306 202
Cash and cash equivalents 347 392
Taxation receivable 19 6
Assets held in disposal group 116 -
Total assets 3 790 3 102
EQUITY AND LIABILITIES
Share capital and reserves 3 353 2 734
Stated capital 818 818
Non-distributable reserves 122 89
Treasury shares (454) (461)
Share option reserve 95 72
Retained earnings 2 711 2 154
Non-controlling interests 61 62
Non-current liabilities 18 44
Interest-bearing loans - 29
Deferred taxation 18 15
Current liabilities 384 324
Trade and other payables 329 277
Provisions 53 43
Interest-bearing loans * -
Taxation payable 2 4
Liabilities directly associated with assets held in disposal group 35
Total equity and liabilities 3 790 3 102
Net asset value per share (cents) 362 296
* Less than R1 million.
Condensed Group statement of changes in equity
For the year ended 30 June 2016
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 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)
Transactions with non-controlling interests - (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
Profit for the year 813 813 38 851
Other comprehensive income for the year 33 33 33
Total comprehensive income for the year - 33 - - 813 846 38 884
Dividends paid (252) (252) (27) (279)
Transactions with non-controlling interests (7) (7) (12) (19)
Share incentive costs (including vesting settlement) 7 23 3 33 33
Balance at 30 June 2016 818 122 (454) 95 2 711 3 292 61 3 353
Condensed Group cash flow statement
For the year ended 30 June 2016
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) 2016 2015
Cash generated by operations 892 864
Dividend paid (279) (212)
Taxation paid (330) (220)
Other 23 11
Cash flow from operating activities 306 443
Additions to property, plant and equipment (375) (219)
Proceeds on disposal of property, plant and equipment 15 49
Increase in investments 21 10
Net changes of interests in subsidiaries (19) (14)
Other - (1)
Cash flow from investing activities (358) (175)
Decrease in loans and borrowings - (136)
Other 7 11
Cash flow from financing activities 7 (125)
Net movement in cash and cash equivalents for the year (45) 143
Cash and cash equivalents at the beginning of the year 392 249
Cash and cash equivalents at the end of the year 347 392
Segmental report
For the year ended 30 June 2016
Turnover Gross margin Net profit before tax
(Rand millions unless June June % June June % June June %
otherwise stated) 2016 2015 change 2016 2015 change 2016 2015 change
Retail 5 441 4 650 17 1 072 904 19 285 232 23
Franchising 200 190 5
Properties 249 223 12
Supply and Support Services 1 934 1 638 18 183 143 28 358 276 30
Associates 96 62 55
Total 7 375 6 288 17 1 255 1 047 20 1 188 983 21
Franchise stores (2 416) (2 109) 15
Consolidation entries (1 420) (1 064) 33 (22) (5) 340 (22) (5) 340
Total Group 3 539 3 115 14 1 233 1 042 18 1 166 978 19
Geographical analysis
Inter-
(Rand millions unless South Rest of group Disposal
otherwise stated) Africa Africa Other* entries Group group
Reviewed year to 30 June 2016
Turnover 4 562 397 - (1 420) 3 539 -
Non-current assets 2 775 115 - (601) 2 289 112
Audited year to 30 June 2015
Turnover 3 863 246 70 (1 064) 3 115 -
Non-current assets 2 461 92 97 (645) 2 005 -
*Australia and Italy.
With Italtile Australia Proprietary Limited being classified as a disposal group, the Australian properties
are no longer presented in the “other” segment of the geographical analysis.
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 2016 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 Preliminary
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 2016. These financial
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 2016 and the financial
position at 30 June 2016.
2. Commitments and contingencies
There are no material contingent assets or liabilities at 30 June 2016.
30 June 30 June
(Rand millions) 2016 2015
Capital commitments
- Contracted 42 176
- Authorised but not contracted for 239 197
Total 281 373
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 sold a 10% stake in TopT Ceramics Proprietary Limited at the beginning of the period under review to a new business
partner identified during the previous financial year. This stake was sold at a cost of R7 million, and reduces the Group’s
interest in this entity to 90%.
5. Cedar Point Trading 326 Proprietary Limited
The Group acquired a 10% non-controlling stake held by one of the previous business partners of Cedar Point Trading 326
Proprietary Limited at a cost of R12 million effective 30 November 2015, which increases the Group’s interest in this entity
to 90%. An additional business partner has since been identified.
6. Assets held in disposal group
At 30 June 2016, management elected to sell the operations of Italtile Australia Proprietary Limited, a subsidiary of Italtile
Limited. The business of Italtile Australia Proprietary Limited represents the Group’s Australian property portfolio. As a buyer
was identified before year end, the assets of the operations were treated as a disposal group at 30 June 2016. The sale is
expected to be concluded during the first half of the 2017 financial year.
7. Staff Share Scheme
During the 2014 financial year, 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 implementation date. As a result, 15,3 million of the Group’s shares net of forfeitures were held by
qualifying staff members at 30 June 2016 (2015: 14,5 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
R13 million (2015: R12 million) to the Group’s profit; R9 million (2015: R7 million) of this charge is a once-off accelerated
expense for franchise staff.
Reviewed Audited
year to year to
30 June 30 June
2016 2015
8. Earnings per share
Reconciliation of shares in issue (all figures in millions):
- Total number of share issued 1 033 1 033
- Shares held by Share Incentive Trust (19) (21)
- BEE treasury shares (88) (88)
Shares in issue to external parties 926 924
Reconciliation of share numbers used for earnings per share
calculations (all figures in millions):
Weighted average number of shares 925 923
- Dilution effect of share awards 15 11
Diluted weighted average number of shares 940 934
Reconciliation of headline earnings (Rand millions):
- Profit attributable to equity shareholders 813 700
- Profit on sale of property, plant and equipment - after taxation (9) (6)
- Fair value gain on SER-Export part disposal - (14)
- Reclassification of exchange difference to income - (19)
Headline earnings 804 661
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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