ITALTILE LIMITED - PreliminaryReviewedCondensedGroupResultsfor theYearended30June2018andDividend Declaration2018

Release Date: 21/08/2018 17:30
Code(s): ITE
 
Wrap Text
Preliminary Reviewed Condensed Group Results for 
the Year ended 30 June 2018 and Dividend 
Declaration 2018

Italtile Limited 
Share code: ITE ISIN: ZAE000099123 
Registration number: 1955/000558/06 
Incorporated in the Republic of South Africa 
("Italtile" or "the Group" or "the Company")

Preliminary reviewed condensed Group results for the year ended 30 June 2018 
and dividend declaration 2018

INTRODUCTION

System-wide turnover R8,7 billion up 40%    
2017: R6,2 billion

Trading profit R1 518 million up 43%    
2017: R1 063 million

Earnings per share 95,0 cents up 6%    
2017 adjusted: 89,7 cents

Headline earnings per share 95,0 cents up 12%    
2017 adjusted: 85,1 cents

Ordinary dividends per share 38,0 cents up 27%    
2017: 30,0 cents

Special dividend per share 30,0 cents               

Net cash R679 million up 33%    
2017: R511 million

Net asset value 486 cents up 21%    
2017 adjusted: 402 cents

Store network 176 stores up 9%    
2017: 162 stores


Commentary
Overview for the year ended 30 June 2018 
Italtile Limited is a franchisor, retailer and manufacturer of tiles, sanitaryware, bathware, laminated and vinyl
flooring and other related home-finishing products. The Group's retail brands are CTM, Italtile Retail and TopT, 
represented through a total network of 176 stores, including four online webstores. The brand offering targets 
homeowners across the LSM 4 to 10 categories.

The retail operation is strategically supported by a vertically integrated supply chain (comprising key manufacturing
and import operations) and an extensive property portfolio.

The Group's dream is to become the best retailer of tiles, sanitaryware and ancillary products in the world, by
offering an unrivalled shopping experience through the strategy of ensuring the right product, at the right time, 
place and price.

2018 marks the 30th anniversary of the Group's listing on the JSE Limited, and the commencement of the Company's 
50th year of trading.

Impact of certain transactions on the Group's results and reporting reference terms
Comparable disclosure and analysis of the Group's results for the year ended 30 June 2018 ("review period") with 
the prior corresponding period have been impacted by the acquisition ("Acquisition") of Ceramic Industries Limited 
("Ceramic") and the partially underwritten renounceable rights offer ("Rights Offer") as detailed below:

Acquisition
Following the Acquisition becoming effective on 2 October 2017, the Group now holds a 95,47% stake in Ceramic and an
effective 71,54% in Ezee Tile Adhesive Manufacturing Proprietary Limited ("Ezee Tile"). Accordingly, the results for 
the review period include the consolidated results of both businesses from 2 October 2017. 

Sales related to Ceramic and Ezee Tile are referred to as "manufacturing" sales to distinguish them from "retail"
sales reported by Italtile's retail brands (CTM, Italtile Retail and TopT).

Issued share capital
In terms of the Acquisition, 150 936 170 Italtile shares were issued to shareholders of Ceramic. Further, in terms 
of the Rights Offer, as published on SENS on 23 October 2017 and 2 November 2017, 135 985 156 Italtile shares were
subscribed for by the close of the Rights Offer on 24 November 2017 (this equated to a 99% take-up). In addition, 
in terms of a specific repurchase of shares ("Repurchase") as published on SENS on 8 March 2018, 25 000 000 Italtile 
shares were purchased by Italtile from Four Arrows Investments 256 Proprietary Limited. 

As a result of the above, the Group's current issued share capital is 1 295 254 148 shares, reflecting an increase of
25,35% (pre-Rights Offer, Acquisition and Repurchase: 1 033 332 822 shares). Consequently, the current review period
weighted average number of shares is higher than that of the prior period. Furthermore, the weighted average number of
shares for the review period and prior corresponding period has been adjusted in accordance with IAS 33 Earnings Per 
Share, in order to account for the deemed bonus element inherent in the rights issue as a result of the Rights Offer 
being priced at a discount to the market share price.

Trading environment
Despite the improved outlook for South Africa and an initial gain in business and consumer confidence following 
recent leadership changes in government, the macro-economic environment remained subdued during the review period. 

In the context of sustained economic pressure on disposable income, consumers remained restrained in their spend on
non-essential items, and discerning in their selection of retailer - with the price/value proposition being a key 
driver of purchasing decisions.

The Group's solid performance for the period is therefore largely a reflection of the impact of enhancements made in
the business during the year which started to gain momentum, particularly in the second six months, as opposed to
improved sentiment or spend by consumers. 

Over the past 30 years since listing on the JSE and almost 50 years since the Group was founded, Italtile has laid
down a strong track record of continued improvement, consistency and resilience. Central to this achievement is our 
unique business model which has served as a major differentiator in the industry and a strong investment proposition 
for franchisees and shareholders. The key components are: 
- Strategic portfolio of strong retail brands, which appeal to consumers across the income spectrum;
- Integrated supply chain which underpins our policy of "right product at the right time, place and price";
- Flat, low-cost organisational structure comprising strong teams and unique individuals intimately involved in the
  operations;
- Recognition that our people are key to our competitive advantage and hence continued investment in them is
  paramount;
- Strong partnerships with employees, equity partners and entrepreneurial franchisees;
- Reward and empowerment ethos which incentivises personnel to participate in the profitability of the business;
- Extensive property portfolio which comprises high-profile, accessible and aspirational stores, state-of-the-art
  factories and productive quarries;
- A customer-centric philosophy which ensures all our activities are centred on keeping them top of mind;
- Longstanding reputation as the industry trend setter and fashion authority, retailing highly fashionable product 
  in all the markets we serve; 
- Sustained investment in improving and innovating the shopping experience and ensuring the offering remains
  attractive to traditional customers and new, emerging homeowners; and
- Concerted focus on developing and employing industry-leading technology in both our retail offering and
  manufacturing operations.

Industry trends
A range of trends is evident, or emerging in our industry and market, which impact on our business. Accordingly, we
have developed strategic responses to mitigate any negative effects and capitalise on the opportunities they present.
These include:
- Constrained consumer discretionary spend, which led to a weaker sales environment and intensified value scrutiny.
  Our response is to ensure our brands are aspirational and offer customers consistent year-round value; our price 
  offering is supported by strong brand equity, product quality and customer-centric service. 
- Highly competitive trading landscape, which featured intense competitor activity with margins sacrificed by peer
  operators striving to survive. Our response is to focus on achieving an optimal product-price-margin matrix which 
  holds appeal for customers but supports profits for store operators. Our robust cost leadership ethos is key to 
  preserving margins.
- Consumer demand for convenience (including accessibility to brick and mortar stores; demand for faster, more
  efficient in-store service; and access to omnichannel shopping experience - seamless transition between online 
  and physical stores). Our response is to continue to roll out stores to underserviced markets; explore flexible 
  store-size formats relevant to specific markets for our brands; invest in technology to improve the customer 
  shopping experience; and expand our online retail and mobile commerce model.
- Industry-wide shortage of skilled retail-specialist personnel. Our response is to continue to invest significantly
  in training and development; while our partnership and reward initiatives are designed to incentivise our people 
  and position the Group as an employer of choice.
- Innovative in-store shopping experiences are increasingly important. Our response is to continue to focus on
  up-weighting the "delight and disrupt" factors in our stores through innovative layouts, lifestyles, products 
  and use of technology. 

Results 
In line with management's expectations, improvements made to the business in the first half of the review period
gained momentum, resulting in a stronger performance in the second half. In summary, while turnover growth reported 
for the period failed to meet management's expectations, pleasing progress was made in improving profitability and 
stabilising margins, achieved through robust cost leadership.

The Group's system-wide turnover for the review period was R8,7 billion, 39,8% higher than the prior corresponding
period (2017: R6,2 billion). System-wide turnover is defined as the aggregate of the Group's consolidated turnover 
(total sales by Group-owned entities and corporate stores, excluding sales from owned supply chain businesses to 
corporate stores) and the retail turnover of franchisees of the Group. 

System-wide retail store turnover grew 2% for the review period compared to the prior corresponding period.

Like-on-like retail store turnover decreased by 1,4% compared to the prior corresponding period. Retail store 
turnover is defined as the aggregate turnover of all stores, either corporate or franchised, in the Group's 
retail network.

Manufacturing sales for the period from 2 October 2017 to 30 June 2018 rose by 15,2% compared to the prior
corresponding period, with manufacturing sales for the review period growing by 10,6% compared to the prior 
corresponding period. 

Trading profit increased by 43% to R1 518 million (2017: R1 063 million). Average selling price inflation is estimated
at 1% in the retail operation (2017: 4,3%) and at 3% in the manufacturing operation.

The Group's basic earnings per share grew by 6% to 95,0 cents (2017 adjusted: 89,7 cents), while headline earnings per
share improved by 12% to 95,0 cents (2017 adjusted: 85,1 cents). 

The disparity between basic earnings and headline earnings growth is attributable to a gain of R37 million realised 
on the disposal of the Italtile Australia property holding business and a gain of R15 million realised on the disposal 
of South African properties during the prior review period.

Retail margins were higher due to intensified cost containment, judicious price promotions which served to support
margins, and an improved mix of higher margin products in the average basket.

Inventory value, including the consolidated inventory balances of Ceramic and Ezee Tile, increased to R806 million
(2017: R548 million). Management is satisfied that good progress has been made in the retail operation to destock,
rationalise and improve the quality and mix of stock across the business. Excluding the inventory balances of Ceramic 
and Ezee Tile, total inventory value decreased from the prior period.

Capital expenditure of R669 million was incurred during the period (2017: R334 million). This includes investments
made across the Group's retail properties and manufacturing plants.

The Group's cash balance rose to R679 million (2017: R511 million), including the consolidated cash balances of
Ceramic and Ezee Tile. Material cash flows for the review period include:
- Capital expenditure of R669 million;
- Tax payments of R435 million;
- Cash consideration for the Acquisition of R1,8 billion;
- Cash proceeds of the Rights Offer of R1,6 billion; and
- Dividend payments of R360 million.

The Group's net asset value per share was 486 cents (2017 adjusted: 402 cents).

Operational review
In response to the prevailing adverse operating environment, management's primary focus has been to leverage
opportunities for growth within the business. The following narrative outlines our key priorities and imperatives 
during the review period and our progress in delivering against them:
- Store roll-out programme: 15 stores were opened and the business is on track to open another 10 to 15 stores in 
  the new financial year.
- Further improvement of the working capital position through intensified control of inventory: across the retail
  network and supply chain (importers), inventory management improved. Enhanced product mix assisted in increasing 
  stock turn, and where inventory levels have risen, this was a function of improved in-stock levels of 
  business-critical items. 
- Better productivity, cost leadership and margin management: good progress was made in the first half of the year 
  and improved on further in the second half, resulting in below-inflation cost growth, while margins improved across 
  the Group despite the weak sales trend. 
- Develop capacity and leverage opportunities in the supply chain: key management appointments have been made, with a 
  view to substantially enhancing the contribution of this operation. In the year ahead we will: trial a new merchandise 
  category in various formats across the brands; commission a new plant to manufacture PVC panels for TopT; expand 
  operations into new African markets; and investigate the potential of outsourcing the management of the new Durban 
  and Cape Town Distribution Centres, which will further streamline the supply chain. 
- Enhance performance management and training initiatives: extensive efforts were made to improve our learnership and 
  recruitment methodologies and we made good inroads in terms of upgrading our store operator complement. 
- Attract, retain and develop an appropriately skilled personnel complement, capable of enabling the Group's growth 
  strategy: key management appointments were made across the business, including in the Supply Chain, Finance, Marketing 
  and Property divisions. 
- Continued development of sector leading technology, retail innovations and market-disruptive strategies: the Group's 
  webstores, particularly CTM, have continued to benefit from early-mover advantage, both in South Africa and the East 
  Africa region. Our online capability is complemented by innovations instore, with the introduction of technology designed 
  to substantially enhance the shopping experience. The state-of-the-art technology employed in Ceramic's tile factories 
  continues to give us a leading edge as the industry fashion trend setter.
- Drive the strategy to offer a customer-centric shopping experience which constantly delights our customers: across the 
  brand network we focused on instilling retail excellence disciplines, resulting in improvements across key areas of the 
  offering, including range, presentation (merchandising and display) and service. Ongoing independent customer satisfaction 
  assessments confirm the improved in-store experience.
- East African expansion: regulatory approval to acquire the formerly franchised CTM Tanzania business was granted in 
  July 2018. The goal over the next four years will be to grow the footprint from four stores (including a webstore) 
  to eight stores.

In addition, Ezee Tile has advanced its expansion drive into sub-Saharan Africa and plans to commission three new
factories in the 2018/19 financial year. Ceramic has also investigated opportunities to build new factories in Rwanda 
and Kenya, and an investment decision in this regard is expected in the new financial year provided adequate raw materials
are identified, gas supply secured and a local partnership established.

Retail brands
Improvements made across the business in the first six months gained momentum over the year, and better execution of
basic retail excellence principles and increased focus on key targets resulted in an improved second half performance
across all the brands. Italtile Retail and TopT built on their solid first half results, delivering double-digit growth.
While CTM recorded lower year-on-year sales as middle-income consumers continued to show stronger symptoms of economic
hardship, low single-digit growth was reported in the second six months.

During the review period, we gauge that Italtile Retail and TopT grew market share, while CTM succeeded in gaining
back share lost in the first half of the year.

CTM
Sales declined in a weak-demand environment; however, good progress was achieved in growing profits and margins. 
Stock turn improved and, although average store inventory increased in the second half, management is satisfied that 
the range, product mix and ratio of business-critical items has been enhanced.

Good results were recorded in attaining key priorities identified, including driving customer service excellence,
enhancing the human capital structure and skills development, and building stronger relationships with suppliers.

During the review period, one new Millennial-format store was opened in Capricorn, Limpopo (2017: two opened) and two
stores revamped, in Hermanus, Western Cape, and Tzaneen, Limpopo (2017: three revamped).

Italtile Retail
In the year under review, the brand achieved improved sales and profitability and reduced general operating costs
across the business. Margins declined nominally due to the strategy to support price-sensitive consumers. Stock turn 
was improved and average store inventory reduced. 

Italtile recorded good progress against its key imperatives, including improving the range overall, aligned to new
technologies in printing, multiple surface finishes, and a variety of sizes in large format porcelain tile slabs. 
A rewarding growth in market share in this high fashion segment was recorded. In addition, the brand's Commercial 
Projects division delivered a strong performance and has become an important contributor to the business.

One new store was opened during the year, in Polokwane (2017: none opened), and four stores were revamped to the
new-look new-generation store format. 

TopT
The business reported improvements across all key metrics including sales, profits and margins, and grew its
contribution to total Group retail sales. Stock turn increased, while stock management resulted in lower average 
store inventory and improved product mix.

During the review period, TopT achieved its key priorities, being to enhance its franchise partner and operator
training programmes; build on collaboration with suppliers to ensure that growing demand was met; grow the brand's 
profile internally and externally; and enhance logistics and distribution to the stores. 

Thirteen stores were opened (2017: 14), four of them corporate stores and the balance franchised.

Supply Chain: Manufacturers
Ceramic Industries
Over the past nine months since acquisition of this operation, our focus has been on improving business-to-business
communication, including enhanced production and logistics planning between the stores and the factories. 

Tiles 
During the review period, improvements were made to the tile matrix, including developing innovative new products and
rationalising the ranges.

The key challenge facing Ceramic is constrained market demand which is prevalent in the sector at present. During the
second half of the year, destocking took place across the Group's stores and industry-wide, as operators sought to
correct overstock positions evident in the first six months. While customer demand increased, volumes are not yet at 
notable levels. This weak market is anticipated to result in underutilisation of capacity in the factories, which will 
impact on profitability. 

Ceramic's state-of-the-art Gryphon plant has commenced producing extra-large format tiles in various sizes to improve
the business's import-replacement advantage. Initial consumer response has been very positive; however, to grow this
market to projected scale will require education of consumers and installers, and consistency of quality on new innovative
product lines.

It is anticipated that in the year ahead, Ceramic will benefit from the reduction of Chinese government export
subsidies and decrease in production of smaller format tiles, which will result in inconsistent supply to our local 
market. Furthermore, Ceramic plans to actively expand its local customer base to counter the weakened demand from 
existing customers.

Bathroomware and baths
Disappointingly, Betta Sanitaryware under-performed management's targets. Operational inefficiencies, exacerbated by
warehouse space constraints, hampered the division's performance. A new management team has been appointed and a
comprehensive review and restructuring of the operation is under way to enable the business to meet the strong demand 
for its products.

After a difficult first six months, in which Betta Baths experienced various manufacturing challenges, remedial
measures implemented served to address shortcomings, and the division reported an improved performance in the 
second half. Enhancing profitability of the business will be prioritised in the year ahead.

Ezee Tile
During the review period, Ezee Tile made good progress in its local market, with the implementation of improvements 
at several of its production facilities; expansion of product lines; and increased penetration of the open market. 

The business also furthered its goal to expand into Africa, concluding joint venture partnerships with resident
partners to build manufacturing plants. 

Supply Chain: Importers
During the year under review, both International Tap Distributors ("ITD") and Cedar Point made good progress in
rationalising ranges, although stockholding targets were not achieved. This will remain a key imperative in the 
year ahead.

Severe supply disruptions out of China in the first half of the year impacted on the Group's in-stock position,
however better anticipation and prudent inventory management eased the situation in the second half, which proved 
less challenging. Due to the supply uncertainty, both ITD and Cedar Point have reviewed their suppliers, and succeeded 
in finding alternative suppliers, both in China and in new markets.

Property investment
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 Group's
manufacturing operations comprise well-maintained state-of-the-art factories which are supplied with raw materials 
sourced from productive quarries in close proximity to the plants. 

As at 30 June 2018, the portfolio's estimated market value was R3,7 billion, comprising a retail portfolio valued at
R2,9 billion (2017: R2,6 billion) and a manufacturing portfolio valued at R0,8 billion. During the review period, 
capital expenditure of R355 million was incurred on the property portfolio on an ongoing store upgrade programme and 
the acquisition of five retail properties, while R277 million was invested across the manufacturing operations on 
plant and equipment upgrades.

Staff share scheme vesting
The Group's equity-settled Staff Share Scheme is designed to incentivise employees to participate in the growth 
and profitability of the business. In this regard, the second allotment of shares, granted in 2014, vested on 
31 August 2017. A total of 134 employees qualified, of which four employees opted to receive shares and the 
balance received the net value of the awards in cash. Cash payments after tax averaged R143 000 per individual 
(aggregate payments including income tax totalled R19 million), funded by the sale of the related shares to the 
market. Employees who elected to receive shares, received an average of 10 600 Italtile Limited shares each 
(dependent on the individual's effective income tax rate).

During the review period, a fifth allotment of shares was made, comprising 3,5 million shares allocated to 
181 eligible employees of the Group and franchisees. As at 30 June 2018, there were 363 participants in the 
scheme, holding 6,9 million Italtile shares.

Directorate
During the review period, several changes were made to the composition of the Board.

Resignation of independent non-executive director
With effect from 29 January 2018, Mr Siyabonga Gama tendered his resignation as an independent non-executive director,
given time constraints in light of his other professional commitments. The Board wishes to record its gratitude to
Siyabonga for his long-standing and valuable contribution to the Group since his appointment as a director in 2004.

Appointment of executive directors
With effect from 11 May 2018, Ms Tsundzukani Mhlanga, formerly Financial Director of certain of the Group's subsidiary
companies, was appointed to the Board as Executive Director: Group Finance and Administration. Tsundzukani replaces
Brandon Wood, who has been appointed Executive Director: Commercial and Supply Chain. 

Appointment of independent non-executive director
With effect from 11 May 2018, Ms Nkateko Khoza was appointed as an independent non-executive director to the Board.
The Board welcomes Nkateko and looks forward to her contribution.

Appointment of deputy chairman
The Nominations Committee ("the Committee") has commenced the process of identifying suitable potential candidates 
to fill the position of non-executive Chairman upon the retirement of our current Chairman, in time. 

The Committee's mandate is to identify candidates who have the appropriate expertise and experience to meet the
requirements of this business, and who satisfy the criteria of key stakeholders, including our shareholders. 

In this regard, Ms Luciana Ravazzotti Langenhoven has been appointed to the Board as deputy chairman with effect 
from 21 August 2018. The Board welcomes Luciana and looks forward to her contribution.

Further, over the course of the next year, the Committee will identify and appoint an additional independent
non-executive Board member with relevant businesses experience, strong leadership qualities and a proven 
track record.

Prospects
Boosting the economy sustainably, improving household prosperity and rebuilding consumer confidence to translate into
positive investment sentiment are key to the growth of our industry. In the foreseeable future, the following 
socio-economic issues need to be addressed urgently: high unemployment and indebtedness, prevailing evidence of 
corruption, and policy uncertainty regarding key issues including prospective wealth taxes and land redistribution 
without compensation. Failure to do so will see consumers remaining under pressure and negatively disposed, and 
homeowners will continue to defer discretionary spend on their  properties.

We anticipate that our first half results for the new financial year will be better than the comparable first half of
the prior year, due to the low base effect. Results in the second half of the year are expected to be less robust than
the second half of the year under review, unless country-specific risk factors reduce materially. 

Our goal for the new financial year will be to continue to deliver improved headline earnings growth.

While the short to medium-term socio-economic forecast is pessimistic, we remain confident that our resilient 
business model will stand us in good stead, as it has done over the past 50 years. We are optimistic that there are
opportunities within the business which we can capitalise on and we have a competent team with clarity of purpose 
and strategy to achieve our growth targets.

We have identified our future focus areas. They include the following imperatives:
- Grow sales across the brands, which will have a positive knock-on effect in the supply chain;
- Continue to improve working capital and manage margins through robust cost leadership;
- Build on our reputation for retail innovation and disruptive technology, including continuing to enhance our 
  leading-edge online offering;
- Accelerate the Group's growth in selected markets in Africa;
- Advance the store roll-out programme, targeting 10 to 15 new stores;
- Progress improvements made in building a pipeline of talent and enhance depth of management;
- Make better use of analytics to inform targeted customer marketing and reward campaigns;
- Leverage opportunities in the integrated supply chain; and
- Upweight our marketing and brand building initiatives. 

Subsequent events
No events have occurred subsequent to the reporting period that require any additional disclosures or adjustments.

Ordinary cash dividend
Following the reduction of the Group's dividend cover to two and a half times (2017: three times) the Board has 
declared a final gross ordinary cash dividend of 21 cents per share (2017: 14,0 cents per share), which together with 
the interim gross ordinary cash dividend of 17,0 cents per share (2017: 16,0 cents per share), produces a total gross 
ordinary cash dividend declared for the year ended 30 June 2018 of 38 cents per share (2017: 30,0 cents per share), 
an increase of 27%.

Special dividend 
In light of the Group's cash reserves being in excess of operational requirements, the Board has declared a special
cash dividend of 30 cents per share (2017: nil). 

Italtile has obtained the relevant South African Reserve Bank approval in respect of the special dividend, and the
Board has reasonably concluded that the Company will satisfy the solvency and liquidity test immediately after 
distribution thereof and for the next 12 months.

Dividend announcement
The Board has declared a final gross ordinary cash dividend (number 104) and a special cash dividend (number 5) for
the year ended 30 June 2018 of 21 cents per ordinary share and 30 cents per ordinary share to all shareholders,
respectively, recorded in the books of Italtile as at the record date of Friday, 7 September 2018.

In accordance with paragraphs 11.17(a)(i) to (x) and 11.17(c) of the Listings Requirements of the JSE ("JSE Listings
Requirements") the following additional information is provided:
- The dividends have been declared out of income reserves. 
- The local dividend withholding tax rate is 20% (twenty percent). 
- The gross local ordinary dividend amount is 21 cents per share for shareholders exempt from the dividends tax.
- The net local ordinary dividend amount is 16,8 cents per share for shareholders liable to pay the dividends tax.
- The local ordinary dividend withholding tax amount is 4,2 cents per share for shareholders liable to pay the
  dividends tax.
- The gross local special dividend amount is 30 cents per share for shareholders exempt from the dividends tax.
- The net local special dividend amount is 24 cents per share for shareholders liable to pay the dividends tax.
- The local special dividend withholding tax amount is 6 cents per share for shareholders liable to pay the 
  dividends tax.
- Italtile's income tax reference number is 9050182717.
- The Group has 1 295 254 148 shares in issue including 12 301 238 shares held by the Italtile Share Incentive Trust
  and 61 851 217 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 dividends will be Tuesday, 4 September 2018. The shares will commence trading ex dividend from the commencement 
of business on Wednesday, 5 September 2018 and the record date will be Friday, 7 September 2018. The dividends will 
be paid on Monday, 10 September 2018. Share certificates may not be rematerialised or dematerialised between 
Wednesday, 5 September 2018 and Friday, 7 September 2018, 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 Company's 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: lizw@rootginger.co.za.

For and on behalf of the Board

J N Potgieter
Chief Executive Officer

B G Wood                  T Mhlanga
Executive Director        Executive Director

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 2018 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 the 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

21 August 2018


System-wide turnover analysis
For the year ended 30 June 2018
                                                                                 (Rand millions unless
                                                                                    otherwise stated)
                                                                      %          Reviewed       Audited    
                                                               increase           year to       year to     
                                                                                  30 June       30 June     
                                                                                     2018          2017    
Group and franchised turnover                                                                              
- By Group owned stores and entities                                 65             6 064         3 670    
- By franchise owned stores (unaudited)                               3             2 615         2 540    
Total                                                                40             8 679         6 210    
                                                                             
Store network                                                                            
At 30 June 2018                                                                           
                                                   2018                                2017
Region                             Franchise      Other      Total      Franchise      Other      Total    
South Africa                                                                                               
- Italtile                                 -         12*        12              -         11*        11    
- CTM                                     34         35*        69             31         38*        69    
- TopT                                    54         22         76             41         23         64    
Rest of Africa                                                                                             
- CTM                                      9*         9*        18              9*         9*        18    
- TopT                                     1          -          1              -          -          -    
                                          98         78        176             81         81        162    
* Includes webstore.


FINANCIALS

Condensed Group statements of comprehensive income
for the year ended 30 June 2018
                                                                                  (Rand millions unless
                                                                                   otherwise stated)
                                                                 %              Reviewed        Audited     
                                                          increase               year to        year to     
                                                                                 30 June        30 June     
                                                                                    2018           2017    
Turnover                                                        65                 6 064          3 670    
Cost of sales                                                                     (3 736)        (2 182)    
Gross profit                                                    56                 2 328          1 488    
Other operating income                                                               417            392    
Operating expenses                                                                (1 227)          (832)    
Profit on sale of property, plant and equipment                                        #             15    
Trading profit                                                  43                 1 518          1 063    
Investment income                                                                     61             32    
Finance cost                                                                         (35)            (1)    
Profit from associates - after tax                                                    31             96    
Profit before taxation                                          32                 1 575          1 190    
Taxation                                                                            (429)          (310)    
Profit for the year                                             30                 1 146            880    
Other comprehensive income                                                                                 
Items that may be reclassified subsequently to           
profit or loss (net of taxation):                           
Foreign currency translation difference                                              (29)           (24)    
Items that have been reclassified subsequently           
to profit or loss:                                          
Recycling of foreign currency translation                
difference on the Australian disposal                                                  -            (75)    
Other comprehensive income from associates                                             4             (7)    
Total comprehensive income for the period                       45                 1 121            774    
Profit attributable to:                                                                                    
- Equity shareholders                                                              1 080            845    
- Non-controlling interests                                                           66             35    
                                                                30                 1 146            880    
Total comprehensive income attributable to:                                                                
- Equity shareholders                                                              1 055            739    
- Non-controlling interests                                                           66             35    
                                                                45                 1 121            774    
Earnings per share (all figures in cents):                                                                 
- Earnings per share                                             6                  95,0           89,7*    
- Headline earnings per share                                   12                  95,0           85,1*    
- Diluted earnings per share                                     6                  94,6           89,2*    
- Diluted headline earnings per share                           12                  94,6           84,7*    
# Less than R1 million.                                                                                    
* Adjusted to account for Rights Offer bonus element.                                                      


Condensed Group statements of financial position
as at 30 June 2018
                                                                                  (Rand millions unless
                                                                                   otherwise stated)
                                                                                Reviewed        Audited     
                                                                                 year to        year to     
                                                                                 30 June        30 June     
                                                                                    2018           2017    
ASSETS                                                                                                     
Non-current assets                                                                 3 872          2 775    
Property, plant and equipment                                                      3 675          1 807    
Investments in associates                                                             23            732    
Long-term assets                                                                     149            176    
Goodwill                                                                              11              6    
Deferred taxation                                                                     14             54    
Current assets                                                                     2 455          1 388    
Inventories                                                                          806            548    
Trade and other receivables                                                          942            313    
Cash and cash equivalents                                                            679            511    
Taxation receivable                                                                   28             16    
Total assets                                                                       6 327          4 163    
EQUITY AND LIABILITIES                                                                                     
Share capital and reserves                                                         5 525          3 773    
Stated capital                                                                     4 010            818    
Non-distributable reserves                                                           (12)            13    
Treasury shares                                                                     (477)          (436)    
Share option reserve                                                                 183             88    
Retained earnings                                                                  1 575          3 230    
Non-controlling interests                                                            246             60    
Non-current liabilities                                                              132             24    
Deferred taxation                                                                    132             24    
Current liabilities                                                                  670            366    
Trade and other payables                                                             534            304    
Provisions                                                                           114             46    
Taxation payable                                                                      22             16    
                                                                                                           
Total Equity and liabilities                                                       6 327          4 163    
Net asset value per share (cents)                                                    486            402*    
*Adjusted to account for Rights Offer bonus element.                                  


Condensed Group statement of changes in equity
for the year ended 30 June 2018
                                   
                                                   (Rand millions unless otherwise stated)
                                            Non-                                                 Non-        
                                         distri-                Share                            con-        
                               Stated    butable   Treasury    option   Retained             trolling     Total    
                              capital   reserves     shares   reserve   earnings    Total    interest    equity   
Balance at 30 June 2016           818        122       (454)       95      2 711    3 292          61     3 353    
Profit for the year                                                          845      845          35       880    
Other comprehensive           
income for the year                         (106)                                    (106)                 (106)    
Total comprehensive           
income for the year                         (106)                            845      739          35       774    
Dividends paid                                                              (292)    (292)        (13)     (305)    
Subsidiary transactions                       (3)                                      (3)                   (3)    
Transactions with             
non-controlling interests                                                    (38)     (38)        (23)      (61)    
Share incentive costs       
(including vesting 
settlement)                                              18        (7)         4       15                    15    
Balance at 30 June 2017           818         13       (436)       88      3 230    3 713          60     3 773    
Profit for the year                                                        1 080    1 080          66     1 146    
Other comprehensive           
income for the year                          (25)                                     (25)                  (25)    
Total comprehensive           
income for the year                          (25)                          1 080    1 055          66     1 121    
Proceeds from Rights Offer      1 565                   (20)                        1 545                 1 545    
Acquisition of interest       
in subsidiaries                 1 924                              88     (2 610)    (598)        129      (469)    
Share repurchase              
from Four Arrows                 (297)                  161                    6     (130)                 (130)    
Distribution received 
from Ceramic Foundation                                (158)                 158        -                     -
Dividends paid                                                              (339)    (339)        (21)     (360)    
Transactions with n           
on-controlling interests                                                                           12        12    
Share incentive costs         
(including vesting)                                     (24)        7         50       33                    33    
Balance at 30 June 2018         4 010        (12)      (477)      183      1 575    5 279         246     5 525    
                                                             

Condensed Group cash flow statement
for the year ended 30 June 2018
                                                                                  (Rand millions unless
                                                                                   otherwise stated)
                                                                                Reviewed        Audited     
                                                                                 year to        year to     
                                                                                 30 June        30 June     
                                                                                    2018           2017    
Cash generated by operations                                                       1 748          1 205    
Dividend paid                                                                       (360)          (305)    
Taxation                                                                            (435)          (322)    
Other*                                                                                26             31    
Cash flow from operating activities                                                  979            609    
Additions to property, plant and equipment                                          (669)          (334)    
Proceeds on disposal of property, plant and equipment                                 11             41    
Increase in investments                                                               33             32    
Increase in long-term financial assets                                                27           (112)    
Net cash flow from acquisition/disposal of subsidiary                             (1 602)            (6)    
Cash flow from investing activities                                               (2 200)          (379)    
Proceeds of share Rights Offer                                                     1 565              -    
Acquisition of non-controlling interest                                                -            (84)    
Treasury share movements                                                            (176)            18    
Cash flow from financing activities                                                1 389            (66)    
Net movement in cash and cash equivalents for the period                             168            164    
Cash and cash equivalents at the beginning of the period                             511            347    
Cash and cash equivalents at the end of the period                                   679            511    
* Includes finance income of R61 million (2017: R32 million) and finance costs of R35 million
  (2017: R1 million).                                                               
  
                                                                            
Segmental report
for the year ended 30 June 2018                                                     
                            (Rand millions unless otherwise stated)                      
                                  Turnover                  Gross margin             Net profit before tax
                          June     June        %      June     June         %      June     June         %     
                          2018     2017   change      2018     2017    change      2018     2017    change    
Retail                   5 828    5 714        2     1 160    1 099         6       325      256        27    
- Group stores           3 213    3 174        1     1 160    1 099         6       325      256        27    
- Franchise stores       2 615    2 540        3                                                              
Franchising                                                                         233      210        11    
Properties                                                                          230      256       (10)   
Supply and                                                                                         
Support Services         1 871    1 966       (5)      179      183        (2)      289      366       (21)   
Manufacturing            2 994        -      100       795        -       100       489        -       100    
Associates                                                                           31       96       (68)   
Total                   10 693    7 680       39     2 134    1 282        66     1 597    1 184        35    
                                                                                                              
Franchise Stores        (2 615)  (2 540)       3                                                              
Consolidation                                                                                      
entries                 (2 014)  (1 470)      37       109        6     1 717       (22)       6      (500)   
Total Group              6 064    3 670       65     2 243    1 288        74     1 575    1 190        32    
                   

Geographical analysis                                                                         
                                                   (Rand millions unless otherwise stated)
                                                                                       Inter-            
                                               South       Rest of                      group                  
                                              Africa        Africa     Australia      entries         Group   
Reviewed year to 30 June 2018                                                                         
Turnover                                       7 284           445           349       (2 014)        6 064    
Non-current assets                             4 333           170           219         (865)        3 857                                               
Audited year to 30 June 2017                                                                                   
Turnover                                       4 717           423             -       (1 470)        3 670    
Non-current assets                             3 166           148             -         (593)        2 721    


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 2018 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 2018. These results have been prepared under the supervision of 
    Executive Director: Group Finance and Administration, Ms T Mhlanga 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 2018 and the financial position at 30 June 2018.

2.  Commitments and contingencies
    There are no material contingent assets or liabilities at 30 June 2018.
                                                                                 (Rand millions unless
                                                                                    otherwise stated)
                                                                                 30 June        30 June     
                                                                                    2018           2017    
    Capital commitments                                                                                    
    - Contracted                                                                     491             60    
    - Authorised but not contracted for                                              294            235    
    Total                                                                            785            295    

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 review period.                                          

4.  Disposal of Australian business
    In the prior year, management elected to sell the operations of Italtile Australia Proprietary Limited, a 
    subsidiary of Italtile Limited. The business of Italtile Australia Proprietary Limited represented the Group's 
    Australian property portfolio. A buyer was identified before the 2016 year end, the assets of the operations 
    were therefore treated as a disposal group at 30 June 2016. The sale was concluded on 13 December 2016, at a 
    total profit of R37 million via a release of foreign currency gains in the foreign currency translation reserve.
    
5.  Ceramic acquisition
    Following the Acquisition on 2 October 2017, the Group now holds a 95,47% stake in Ceramic and an effective 
    71,54% in Ezee Tile. Accordingly, the results for the review period include the consolidated results of both 
    businesses from 2 October 2017.

    On 2 October 2017, the Group acquired an additional 74,5% interest in the voting shares of Ceramic for a 
    consideration of R3,5 billion, increasing its ownership interest to 95,47%. Ceramic is a manufacturer of 
    glazed porcelain floor tiles; ceramic wall and floor tiles; vitreous china sanitaryware and acrylic baths 
    and shower trays. The Group acquired the additional interest in Ceramic because the Acquisition will result 
    in improved efficiencies and reduced costs; enhance the allocation of capital as well as create a depth 
    of management, experience and skill within the Group.

    The Group has elected to measure non-controlling interests in Ceramic at proportionate share of the 
    book value.
                                                                    
    Assets acquired and liabilities assumed                       
    The book values of the identifiable assets and liabilities of Ceramic as at 2 October 2017 are:
                                                                                              R million    
    Assets                                                                                                 
    Property, plant and equipment                                                                 1 431    
    Goodwill                                                                                          5    
    Equity-accounted investee                                                                        57    
    Deferred taxation assets                                                                          2    
    Inventories                                                                                     238    
    Trade and other receivables                                                                     549    
    Income tax receivable                                                                             -    
    Cash and cash equivalents                                                                       141    
                                                                                                  2 423    
    Liabilities                                                                                            
    Shareholders' loans                                                                               4    
    Deferred taxation liabilities                                                                    83    
    Trade and other payables and provisions                                                         352    
    Income tax payable                                                                               14    
    Shareholders for dividends                                                                        #    
                                                                                                    453    
    Total identifiable net assets at fair value                                                   1 970    
    # Less than R1 million.

    The Group has also obtained a controlling interest in Ezee Tile as a result of the Acquisition. Prior to 
    the Acquisition, Italtile Ceramics and Ceramic each held a 36,6% interest in Ezee Tile. Post the Acquisition, 
    the Group now holds an effective interest of 71,54% in Ezee Tile.

    The book values of the identifiable assets and liabilities of Ezee Tile as at 2 October 2017 are:
                                                                  
                                                                                              R million    
    Assets                                                                                                 
    Property, plant and equipment                                                                    42    
    Investments in subsidiaries                                                                       5    
    Inventories                                                                                      43    
    Loans to group companies                                                                          7    
    Trade and other receivables                                                                      78    
    Cash and cash equivalents                                                                        27    
                                                                                                    202    
    Liabilities                                                                                            
    Deferred taxation liabilities                                                                     #    
    Trade and other payables and provisions                                                          57    
    Loans from group companies                                                                        6    
    Income tax payable                                                                                5    
                                                                                                     68    
    Total identifiable net assets at fair value                                                     134    
    # Less than R1 million.                                                                                

    The Group adopted a pooling of interest accounting policy to account for the Acquisition which is a common 
    control transaction and thus scoped out of IFRS 3 Business Combinations ("IFRS 3"). Under the pooling of 
    interest method, the carrying amounts of the assets and liabilities of Ceramic and Ezee Tile have been 
    included in the statement of financial position of Italtile, with the difference between the purchase 
    consideration and the net assets of Ceramic and Ezee Tile being included directly in equity and netted 
    off against retained income. This amounted to R2.6 billion.                     

    No goodwill was recognised.

    Transaction costs amounting to R25 million related to the Acquisition were incurred and capitalised to 
    the cost of investment in Ceramic.                     

6.  Rights Offer
    In terms of a partially underwritten renounceable Rights Offer, the Group offered a total of 260 539 178 new 
    ordinary shares of no par value ("Rights Offer Shares") at a subscription price of R11,57 in the ratio of 
    22 Rights Offer Shares for every 100 Italtile shares held at the close of business on 10 November 2017. 
    Following the close of the Rights Offer on Friday, 24 November 2017, 135 985 156 Rights Offer Shares were 
    subscribed for, equivalent to 99% of the 137 473 296 Rights Offer Shares that could have been subscribed for 
    (a large portion of Rights was not followed by Rallen Proprietary Limited, as the Rights Offer had taken place 
    in order to allow minority shareholders of Italtile an opportunity to claw back their shareholding positions 
    which were diluted as a result of the Acquisition).                                           

    Proceeds of the Rights Offer totalled R1,6 billion, and were utilised to settle the outstanding cash portion 
    (and interest thereon) related to the Acquisition.                                           

7.  International Tap Distributors Proprietary Limited
    The Group sold a 10% non-controlling stake in International Tap Distributors Proprietary Limited at the beginning 
    of January 2018 to a new business partner, at a cost of R14 million, reducing the Group's interest in this entity 
    to 88%.                                           

8.  Four Arrows transactions
    On 20 February 2018, Four Arrows Investments 256 Proprietary Limited ("Four Arrows") submitted a formal written 
    offer to the Group to sell 25 million of the 35,2 million Italtile shares it held, back to the Group. The offer 
    price was set in accordance with the terms of a Preference Share Agreement signed in 2007, in terms of which 
    Four Arrows had raised the funds for the purchase of the 35,2 million shares. According to this agreement, the 
    offer price was set at R11,83 per share (the Italtile 10-day VWAP immediately preceding the date of receipt of 
    the offer), amounting to R295 750 000 in total.                                           

    In accordance with specific approval granted by Italtile shareholders in July 2007, the Board approved the 
    repurchase and the shares were subsequently repurchased on 13 March 2018. Following acceptance of the offer 
    and approval by the Board, Italtile called for the redemption of 800 000 redeemable, cumulative preference 
    shares in Four Arrows, the capital and arrear dividends totalling R165 790 840 for such. The redemption payment 
    was made on 20 March 2018.                                           

    The transactions resulted in a net cash outflow of R129,7 million and a reduction of 25 million shares in the 
    Group's issued share capital as the shares which were repurchased by Italtile were cancelled in terms of the 
    Companies Act.                                           

9.  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 the implementation date. As a result, 
    seven million of the Group's shares net of forfeitures were held by qualifying staff members at 30 June 2018 
    (2017: seven 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 second allotment of shares in the scheme, granted in 2014, vested on 31 August 2017. A total of 134 employees 
    qualified for the vesting, of which four employees opted to receive shares and the balance received the net value 
    of the awards in cash. This resulted in a decrease in treasury shares of 1 468 409 (2017: 4 879 577) 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 R16 million (2017: R17 million) to the Group's income; R9 million (2017: R10 million) of this 
    charge is a once-off accelerated expense for franchise staff. 

10. Distribution received from Ceramic Foundation
    On 14 June 2018, the Ceramic Foundation Trust transfered 13 670 595 Italtile shares to the Italtile and Ceramic 
    Foundation Trust, which is consolidated for Group reporting purposes. The transfer was done in order to merge
    the two trusts, which embark on social economic development projects independently from the Group. The transfer
    has resulted in an increase in treasury shares of 13 670 595 shares and related carrying value of R158 million.    

                                                                                Reviewed        Audited     
                                                                                 year to        year to     
                                                                                 30 June        30 June     
                                                                                    2018           2017    
11. Earnings per share                                                                                      
    Reconciliation of shares in issue (all figures in millions):                                            
    - Total number of share issued                                                 1 295          1 033    
    - Shares held by Share Incentive Trust                                           (12)           (10)    
    - BEE treasury shares                                                            (62)           (83)    
    Shares in issue to external parties                                            1 221            940    
    Reconciliation of share numbers used for earnings per share 
    calculations (all figures in millions):                              
    Weighted average number of shares in issue                                     1 133            936    
    Weighting of Rights Offer bonus element                                            3              6    
    Weighted average number of shares#                                             1 136            942    
    - Dilution effect of share awards                                                  5              5    
    Diluted weighted average number of shares                                      1 141            947    
    Reconciliation of headline earnings (Rand millions):                                                   
    - Profit attributable to equity shareholders                                   1 080            845    
    - Profit on sale of property, plant and equipment - after taxation                 *            (12)    
    - Profit on sale of Australian operation - after taxation                          -            (30)    
    Headline earnings                                                              1 080            803    
    * Less than R1 million.
    # The weighted average number of shares has been adjusted in accordance with IAS 33 Earnings per Share, 
      to account the deemed bonus element inherent in the Rights Offer.

    No adjustments to earnings are required for diluted earnings per share calculations, as the share awards 
    do not have an impact on diluted earnings.

12. Supplementary disclosure
    A pro forma Group statement of comprehensive income has been prepared in order to demonstrate the financial 
    performance of the Group had the Acquisition not taken place in the current period. In addition, a pro forma 
    statement of comprehensive income has been prepared for the manufacturing businesses (Ceramic and Ezee Tile) 
    to demonstrate the financial performance of these businesses for the current period. This information has not 
    been reviewed by the Group's auditors and is available on the corporate website (www.italtile.com).


Administration
Registered office: 
The Italtile Building, corner William Nicol Drive and Peter Place, Bryanston (PO Box 1689, Randburg 2125) 

Transfer secretaries: 
Computershare Investor Services Proprietary Limited 

Company Secretary: 
E J Willis 

Sponsor:
Merchantec Capital 

Auditor: 
Ernst & Young Inc.

Executive directors:
J N Potgieter (Chief Executive Officer), B G Wood (Executive Director: Commercial and Supply Chain)
T T A Mhlanga (Executive Director: Finance and Administration) 

Non-executive directors: G A M Ravazzotti (Non-executive Chairman), LR Langenhoven (Non-executive Deputy Chairman), 
S M du Toit, N Medupe, G Mtetwa, S G Pretorius, N P Khoza

For full financial results please visit our website:
www.italtile.com
Date: 21/08/2018 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story