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ITE
ITE
ITE - Italtile Limited - Preliminary profit announcement - Reviewed Group
results for the year ended 30 June 2008
ITALTILE LIMITED
(ITALTILE) Incorporated in the Republic of South Africa
Share code: ITE ISIN: ZAE000099123
Reg. No. 1955/000558/06
Vat. No. 4570231607
PRELIMINARY PROFIT ANNOUNCEMENT
Reviewed Group results for the year ended 30 June 2008
SYSTEM-WIDE TURNOVER ANALYSIS
for the year ended 30 June 2008
Year to Year to
30 June 2008 30 June 2007
(Rand millions unless otherwise % increase
stated)
Group and franchised turnover
- By Group-owned stores 1 635 1 477
(reviewed)
- By franchise-owned stores 1 133 1 101
(unaudited)
TOTAL 7 2 768 2 578
ABRIDGED GROUP INCOME STATEMENTS
for the year ended 30 June 2008
Reviewed Audited
year to year to
30 June 2008 30 June 2007
(Rand millions unless otherwise % increase
stated)
Trading profit before 463 427
depreciation
BEE share option expense (25) -
Depreciation (41) (34)
Profit on sale of property, 2 -
plant and equipment
Trading profit 2 399 393
Investment income 20 17
Profit before interest paid 419 410
Interest paid (14) (2)
Profit before taxation (1) 405 408
Taxation (128) (131)
Profit for the year - 277 277
Attributable to:
Equity holders of the parent 275 270
Minority interests 2 7
- 277 277
Number of shares in issue 793 823 797 336
(000`s)*
Earnings per share (cents) 2 34,6 33,9
Headline earnings per share 1 34,4 33,9
(cents)
Adjusted headline earnings per 11 37,5 33,9
share (cents)
Diluted earnings per share 3 34,4 33,5
(cents)
Diluted headline earnings per 2 34,2 33,6
share (cents)
Dividends per share (cents) 5 12,0 11,4
RECONCILIATION OF HEADLINE
EARNINGS
Earnings attributable to 275 270
ordinary shareholders
Profit on sale of property, (2) -
plant and equipment
Headline earnings 273 270
RECONCILIATION OF SHARES IN
ISSUE*
Total number of shares issued 909 800 821 800
(000`s)
Share incentive trust shares (27 977) (24 464)
(000`s)
BEE treasury shares (000`s) (88 000) -
Shares in issue to external 793 823 797 336
parties (000`s)
SEGMENTAL REPORTING
for the year ended 30 June 2008
(Rand millions Retail Fran- Properties Supply Group
unless otherwise chising and
stated) support
services
Reviewed year to
June 2008
Revenue* 1 333 60 62 345 1 800
Segment results 253 87 37 22 399
Audited year to
June 2007
Revenue* 1 272 55 51 226 1 604
Segment results 239 78 27 49 393
*Revenue includes turnover, rentals and royalties.
ABRIDGED GROUP BALANCE SHEETS
for the year ended 30 June 2008
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) 2008 2007
ASSETS
Non-current assets 887 771
Property, plant and equipment 861 753
Other long-term assets 17 11
Goodwill 6 4
Deferred tax 3 3
Current assets 680 573
Inventories 263 224
Trade and other receivables 136 91
Cash and cash equivalents 281 258
Total assets 1 567 1 344
EQUITY AND LIABILITIES
Capital and reserves 1 183 976
Stated capital 417 27
Non-distributable reserve 80 28
Treasury shares (473) (54)
Retained profit 1 134 943
Outside shareholders` interest 25 32
Long-term liabilities 98 11
Current liabilities 286 357
Trade and other payables 276 334
Taxation 10 23
1 567 1 344
Net asset value per share (cents) 149 122
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2008
Non-
distrib-
(Rand millions Treas- Re-
unless otherwise
stated) Stated utable ury Minority tained
Group capital reserve shares interest profit Total
Balance at 30 27 17 (48) 30 768 794
June 2006
Net profit for 7 270 277
the year
Dividends paid (4) (95) (99)
Currency
translation
difference 10 10
Share-based 1 1
payment reserve
Unallocated
shares in
share trust (6) (6)
Accumulated
surplus in
share trust - -
Share capital 1 1
increase
Purchase of
additional
share in (2) (2)
subsidiary
Balance at 30 27 28 (54) 32 943 976
June 2007
Net profit for 2 275 277
the year
Dividends paid (1) (84) (85)
Currency
translation
difference 26 26
Share-based 1 1
payment reserve
BEE share-based 25 25
payment reserve
BEE shares issued 402 (402) -
and treated as
treasury shares
BEE share issue (12) (12)
expense
Unallocated
shares in
share trust (20) (20)
Accumulated
surplus in
share trust 3 3
Purchase of
additional
share in (8) (8)
subsidiary
Balance at 30 417 80 (473) 25 1 134 1 183
June 2008
CASH FLOW STATEMENT
for the year ended 30 June 2008
Reviewed Audited
year to year to
30 June 30 June
(Rand million unless otherwise stated) 2008 2007
Cash flow from operating activities 107 168
Cash flow from investing activities (138) (255)
Cash flow from financing activities 54 2
Net movement in cash and cash equivalents 23 (85)
Cash and cash equivalents at beginning of year 258 343
Cash and cash equivalents at end of year 281 258
NOTES
- There are no material contingent liabilities or assets
at 30 June 2008
- Capital commitments at 30 June 2008 Rm
Contracted 41
Authorised, not contracted 60
101
In terms of the articles of association, the company`s borrowing facilities are
unlimited.
COMMENTARY
RESULTS
The Group reported a 7% increase in system-wide turnover to R2,77 billion (2007:
R2,58 billion). Price inflation was limited to 1,5%, reflecting real growth of
6% from the existing store network, as the Group consolidated its market
advantages and held back on price increases to benefit consumers.
Reported trading profit increased by 2% to R399 million (2007: R393 million),
which includes a once-off IFRS cost of R25 million associated with the IFRS 2
(Share based payments) expense of the transaction. Excluding the impact of this
transaction reflects a normalised increase of 7,9% in trading profit. Increased
financing costs of R14 million (2007: R2 million) resulted largely from property
related borrowings.
During the second half of the financial year, the Group was successful in
decreasing inventories by 19% to R263 million (31 December 2007: R322 million)
despite slower market demand, which is in line with historic levels.
The Group`s cash reserves increased by R23 million to R281 million (2007: R258
million). The Group`s current ratio improved to 2,4 times (2007: 1,6 times) as
the R73 million property borrowings released working capital to fund operations.
During the period, direct property investments and store enhancements totalling
R126 million were concluded as the Group continued to upgrade its stores.
The tangible net asset value per share has increased by 22% to 149 cents (2007:
122 cents).
TRADING ENVIRONMENT
Pressure on consumers` discretionary spending across all demographic segments,
as a result of higher interest rates and rampant inflation, was evidenced in
lower traffic across the Group`s store network. With decreased capacity to
spend, customers` buying decisions have become more conservative and focused on
making quality purchases. This flight to quality plays to the Group`s strengths
with its well established brands and service oriented culture.
OPERATIONAL OVERVIEW
Having identified a potential opportunity to supply the highly price-sensitive
entry level market, the Group, launched a third brand, named Top T during the
year. At 30 June 2008, four Group-owned stores had been established at Group
sites which were previously vacated due to relocations. Top T, which fits in
strategically below CTM, will target developing rural towns and smaller markets.
The brand has good expansion prospects and leverages the Group`s extensive
buying power.
In order to harness the full potential of the Italtile brand faster, the two top
performing store operators who have proven track records with the Group were
incentivised with equity in the national Italtile brand. The Group is confident
that as shareholders, they will focus exclusively on growing the Italtile brand.
The Group maintained the momentum with initiatives to consolidate its dominant
position in the South African market. Projects to enhance systems and controls
in the pursuit of a superior customer experience and to further improve in-store
service levels are delivering benefits, especially as the cyclical downturn
plays itself out. The Group maintained its focus on training and mentorship to
grow and develop a pool of future store leaders. In addition, its skills
transfer initiatives, which include the Tiling Academy, have been attended by
approximately 800 individuals since inception.
Store network at 30 June 2008:
2008 2007
Region Franchise Group Total Franchise Group Total
South Africa:
Italtile 3 4 7 3 5 8
CTM 39 26 65 36 32 68
Top T - 4 4 - - -
Africa 13 1 14 13 - 13
(excluding
South Africa)
Australia - 8 8 - 8 8
Total 55 43 98 52 45 97
The Group increased its holding in International Tap Distribution (ITD) from 60%
to 80% with effect from 2 July 2007.
The Group`s closer involvement resulting from the new partnership model in its
fourteen sub-equatorial African stores is starting to yield results and the
Group continues to evaluate opportunities.
The Group`s Australian operation, comprised of eight stores, once again made a
positive contribution to Group results due to its more intimate understanding of
regional consumer requirements and further refinement of its retail model.
PROPERTY PORTFOLIO
The quality of the Group`s property portfolio was confirmed through a tri-annual
valuation which disclosed a value of R1,1 billion, compared to its carrying
value of R640 million at the end of June 2008.
The Group`s property portfolio maintained returns which were in line with those
of its trading operations during the year under review.
The Group continues to evaluate development opportunities, especially given the
current market where softening land prices have the potential to offer higher
long term returns. With its capacity to fund property investments, the Group
will look to take advantage of the current market to further strengthen its
property portfolio.
Black economic empowerment
The Group`s BEE transaction became effective on 11 February 2008 as the
remaining administrative conditions and requirements were fulfilled. The Group
is now in a position to participate in new markets as a result of its BEE
partnerships.
PROSPECTS
Despite trading conditions which are expected to remain difficult in the coming
year, the Board anticipates that profitability will be maintained at current
levels.
SUB-DIVISION OF SHARES
On 6 November 2007 the Company altered its authorised and issued share capital
by subdividing every share of no par value in the company`s authorised and
issued share capital into 44 ordinary shares of no par value.
BASIS OF PREPARATION
The preliminary profit announcement has been prepared in accordance with
International Financial Reporting Standards (IFRS) and is prepared on the
historical cost basis, adjusted for the fair value of certain assets and
liabilities.
DIVIDEND
Based on operational progress during the second half of the financial year, the
Group has reverted to the historic dividend cover of three times.
The board has declared a final dividend of 8 cents per share (2007: 6,1 cents),
which together with the interim ordinary dividend of 4 cents, produces a total
ordinary dividend declared for the year of 12 cents (2007: 11,4 cents), an
improvement of 5,3%.
DIVIDEND ANNOUNCEMENT
The board has declared a final dividend (number 84) of 8 cents per share to all
shareholders recorded in the books of Italtile Limited. The last day to trade
cum the dividend will be Friday, 29 August 2008. The shares of Italtile Limited
will commence trading ex dividend from the commencement of business on Monday, 1
September 2008 and the record date will be Friday, 5 September 2008. Payments
will be made on Monday, 8 September 2008.
Share certificates may not be rematerialised or dematerialised between Monday, 1
September 2008 and Friday, 5 September 2008, both days inclusive.
For and on behalf of the board
G P E Ravazzotti P D Swatton
Chief Executive Officer Chief Financial Officer
The results have been reviewed by Ernst & Young and their review opinion is
available on request from the company secretary at the company`s registered
office or own address.
11 August 2008
Registered office: The Italtile Building, cnr William Nicol Drive and Peter
Place, Bryanston (PO Box 1689, Randburg 2125)
Transfer secretaries: Computershare Investor Services (Pty) Limited70 Marshall
Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107)
Executive directors: G A M Ravazzotti (Chairman), ?G P E Ravazzotti (Chief
Executive Officer),? P D Swatton* (Chief Financial Officer).
Non-executive directors: S I Gama, G K A Morolo, D H Rabin, G Zannoni**
(*British **Italian)
Refer to Italtile`s corporate website: www.italtile.com
Date: 12/08/2008 07:05:03 Produced by the JSE SENS Department.
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