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ITALTILE LIMITED - Voluntary Trading Statement for the Six Months Ended 31 December 2019

Release Date: 07/02/2020 07:05
Code(s): ITE     PDF:  
Wrap Text
Voluntary Trading Statement for the Six Months Ended 31 December 2019


ITALTILE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1955/000558/06)
Share code: ITE  ISIN: ZAE000099123
(“Italtile” or “the Group”)
 

VOLUNTARY TRADING STATEMENT FOR THE SIX MONTHS ENDED 31 DECEMBER 2019


Italtile is currently finalising its results for the six months ended 31 December 2019 (“the review
period”).

This trading statement includes the contribution of Ceramic Industries Proprietary Limited
(“Ceramic”), in which the Group holds a 95.47% stake, and Ezee Tile Adhesive Manufacturers
Proprietary Limited (“Ezee Tile”), in which the Group holds an effective 71.54% stake. 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, namely CTM, Italtile Retail, TopT and U-Light.

OPERATING ENVIRONMENT

Lacklustre trading conditions persisted over the review period. Consumer confidence and investment
sentiment remained subdued in the absence of transformational economic and socio-political
reforms, continued policy uncertainty and an increasingly unstable power supply, while household
discretionary spend remained severely constrained in the context of escalating living costs, limited
wage inflation, high levels of personal debt, retrenchments and unprecedented unemployment rates.

RESULTS

Despite the challenging operating environment, the Group reported solid results for the review
period, reflecting the strength of its strategically structured resilient business model.

System-wide turnover for the review period was R5.4 billion, 1.4% higher than the prior corresponding
period (2018: R5.3 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.

Retail
In the weak demand environment, creditable retail turnover growth was achieved, attributable to
management’s unwavering focus on improving the customer experience and driving sales through
investment in people, technology, store layouts, merchandising and range.

Total retail store turnover rose 4.5% for the review period compared to the previous corresponding
period, with average selling price inflation estimated at 1.5%. Like-for-like retail store turnover growth
of 1.7% was below management’s benchmark. Retail store turnover is defined as the aggregate
turnover of all stores, both corporate and franchised, in the Group’s retail network.

Manufacturing
Generally softer consumer demand and the overstock position of tile wholesalers in the industry
impacted negatively on Ceramic’s sales, which were flat compared to the previous corresponding
period. However, as remedial measures took effect Ezee Tile succeeded in reversing the disappointing
performance reported in the prior year. This business delivered good sales growth of 7.3%, which
contributed to the manufacturing division’s total sales growth of 1.3%. Estimated average selling price
inflation in the manufacturing division was 1.0% for the review period.

EARNINGS

During the review period, the Group incurred a once-off charge of R39.0 million related to the Broad-
Based Black Economic Empowerment (“BBBEE”) transaction concluded with Yard Investment Holdings
Proprietary Limited, (“Yard”), as announced on SENS on 10 September 2019. Accordingly, the guidance
below illustrates the Group’s BBBEE transaction impact on earnings per share (“EPS”) and headline
earnings per share (“HEPS”) for the review period.

                                    Six months to          Six months to               Percentage
                                    31 December 2018       31 December 2019            change
 Excluding BBBEE charge
 - Earnings per share               55.4 cents             57.6 cents to 59.3 cents     4% to 7%
 - Headline earnings per share      54.7 cents             58.0 cents to 59.1 cents     6% to 8%
 
Including BBBEE charge
 - Earnings per share               55.4 cents             54.3 cents to 56.5 cents    -2% to 2%
 - Headline earnings per share      54.7 cents             54.7 cents to 55.8 cents     0% to 2%

OUTLOOK

While the weak macro-economic conditions are extremely challenging and expected to persist for the
foreseeable future, management remains optimistic that the Group will deliver growth for the full
financial year.

In the Group’s reviewed results for the year ended 30 June 2019 published on SENS on 22 August 2019,
management projected that due to the high base effect, growth in the first six months of the year
would likely be lower than the second six months. However, given the continuing deterioration of the
economy - and the retail and construction sectors specifically - growth in the second half of the year
is now anticipated to be less robust than envisaged, and more likely in line with the current review
period.

Notwithstanding the discouraging external environment, management remains committed to
optimising on the opportunities within its control in the business to drive continued growth.

REVIEW OF RESULTS

The information on which this announcement is based has not been reviewed or reported on by
Italtile's auditors.

PUBLICATION OF RESULTS

The Group's results for the six months ended 31 December 2019 are expected to be published on SENS
on or about 13 February 2020.

Johannesburg
7 February 2020

Sponsor
Merchantec Capital

Date: 07-02-2020 07:05:00
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