| Tue 11 Aug 2009, 7:05 | | ITE - Italtile - Preliminary profit announcement reviewed group results for |
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ITE - Italtile - Preliminary profit announcement reviewed group results for
the year ended 30 June 2009
ITALTILE LIMITED
Share code: ITE
ISIN: ZAE000099123
Registration number: 1955/000558/06
Incorporated in the Republic of South Africa
("Italtile" or "the Group")
Preliminary profit announcement reviewed group results for the year ended 30
June 2009
System-wide turnover analysis
for the year ended 30 June 2009
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) % decrease 2009 2008
Group and franchised turnover
- By Group-owned stores 1 303 1 635
- By franchise-owned stores (unaudited) 1 268 1 133
TOTAL (7) 2 571 2 768
Abridged Group income statements
for the year ended 30 June 2009
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) % decrease 2009 2008
Trading profit before depreciation 403 463
BEE share option expense (25)
Depreciation (41) (41)
Profit/(Loss) on sale of property, plant (1) 2
and equipment
Trading profit (10) 361 399
Investment income 48 20
Profit before interest paid 409 419
Interest paid (40) (14)
Profit before taxation (9) 369 405
Taxation (109) (128)
Profit for the year (6) 260 277
Attributable to:
Equity holders of the parent 257 275
Minority interests 3 2
(6) 260 277
Number of shares in issue (000`s)* 795 984 793 823
Earnings per share (cents) (7) 32,3 34,6
Headline earnings per share (cents) (6) 32,4 34,4
Adjusted headline earnings per share (14) 32,4 37,5
(cents)
Diluted earnings per share (cents) (6) 32,3 34,4
Diluted headline earnings per share (5) 32,4 34,2
(cents)
Dividends per share (cents) (8) 11,0 12,0
RECONCILIATION OF HEADLINE EARNINGS
Earnings attributable to ordinary 257 275
shareholders
Profit/(Loss) on sale of property, plant 1 (2)
and equipment
Headline earnings 258 273
RECONCILIATION OF SHARES IN ISSUE*
Total number of shares issued (000`s) 909 800 909 800
Share incentive trust shares (000`s) 25 816 27 977
BEE treasury shares (000`s) 88 000 88 000
Shares in issue to external parties 795 984 793 823
(000`s)
Segmental reporting
for the year ended 30 June 2009
Supply
and
(Rand millions unless Fran- Proper- support
otherwise stated) Retail chising ties services Group
Reviewed year to June 2009
Gross revenue* 1 052 111 138 576 1,877
Intra group transactions (46) (60) (278) (384)
Net revenue 1 052 65 78 298 1,493
Gross results 48 82 109 122 361
Intra group transactions 135 12 (60) (87) -
Net segment results 183 94 49 35 361
Audited year to June 2008
Gross revenue* 1 333 121 144 829 2,427
Intra group transactions (61) (82) (484) (627)
Net revenue 1 333 60 62 345 1 800
Gross results 62 79 119 139 399
Intra group transactions 191 8 (82) (117) -
Net segment results 253 87 37 22 399
*Revenue includes turnover, rentals and royalties.
Abridged Group balance sheets
for the year ended 30 June 2009
Reviewed Audited
year to year to
30 June 30 June
(Rand millions unless otherwise stated) 2009 2008
ASSETS
Non-current assets 937 887
Property, plant and equipment 914 861
Other long-term assets 16 17
Goodwill 6 6
Deferred tax 1 3
Current assets 994 680
Inventories 191 263
Trade and other receivables 136 136
Cash and cash equivalents 667 281
Total assets 1 931 1 567
EQUITY AND LIABILITIES
Capital and reserves 1 346 1 183
Stated capital 417 417
Non-distributable reserve 78 80
Treasury shares (473) (473)
Retained profit 1 284 1 134
Outside shareholders` interest 40 25
Long-term liabilities 341 98
Current liabilities 244 286
Trade and other payables 238 276
Taxation 6 10
1 931 1 567
Net asset value per share (cents) 169 149
Statement of changes in equity
for the year ended 30 June 2009
(Rand millions Non-
unless otherwise distri-
stated)
Stated butable Treasury Minority Retained
Group capital reserve shares interest profit Total
Balance at 30 June 27 28 (54) 32 943 976
2007
Net profit for the 2 275 277
period
Dividends paid (1) (84) (85)
Currency 26 26
translation
difference
Share option costs 1 1
BEE share-based 25 25
payment reserve
BEE shares issued 402 (402) -
and treated as
treasury shares
BEE share issue (12) (12)
expenses
Unallocated shares (20) (20)
in share trust
Accumulated surplus 3 3
in share trust
Purchase of (8) (8)
additional share in
subsidiary
Balance at 30 June 417 80 (473) 25 1 134 1 183
2008
Net profit for the 3 257 260
period
Dividends paid (4) (107) (111)
Currency (12) (12)
translation
difference
Share option costs - -
Unallocated shares 2 2
in share trust
Accumulated surplus (2) (2)
in share trust
Sale of minority 10 16 26
interest
Balance at 30 June 417 78 (473) 40 1 284 1 346
2009
Cash flow statement
for the year ended 30 June 2009
Reviewed Audited
year to year to
30 June 30 June
(Rand million unless otherwise stated) 2009 2008
Cash flow from operating activities 223 107
Cash flow from investing activities (77) (138)
Cash flow from financing activities 240 54
Net movement in cash and cash equivalents 386 23
Cash and cash equivalents at beginning of year 281 258
Cash and cash equivalents at end of year 667 281
Notes
- There are no material contingent liabilities or assets at 30
June 2009
- Capital commitments at 30 June 2009 Rm
Contracted 23
- Authorised, not contracted 46
69
In terms of the articles of association, the company`s borrowing facilities
are unlimited.
Store network
at 30 June 2009
2009 2008
Region Franchise Other Total Franchise Other Total
South Africa:
Italtile 2 5 7 3 4 7
CTM 42 24 66 39 26 65
Top T 4 4 8 - 4 4
Africa
(excluding
South Africa) 12 2 14 13 1 14
Australia - 9 9 - 8 8
Total 60 44 104 55 43 98
Commentary
Results
The sustained economic downturn has dramatically curtailed consumer
discretionary spend, hampering the sector`s performance. Notwithstanding these
testing conditions, Italtile gained marginal market share and delivered
creditable results in line with market expectations.
The Group reported a 7% decline in organic system-wide turnover to R2,57
billion (2008: R2,77 billion).
In the current competitive market, the Group restricted price inflation to
2,5%.
Reported trading profit decreased by 10% to R361 million
(2008: R399 million). Group operating margin remained firm.
Despite reduced consumer traffic in general, the Group benefited from an
increase in average selling price.
Inventory management has been a consistent theme throughout the review period.
Stockturn remained a priority, both at store level and in the supply chain.
Each successive quarter has witnessed a reduction in stockholding, resulting
in a strong balance sheet and improved product mix. In December 2007,
inventories were valued at R322 million, at June 2008 this was reduced to R263
million, and further reduced to R224 million by December 2008. The Group`s
current inventory is R191 million, reflecting a decrease of 27% over the
reporting period.
Cash reserves have increased from R281 million in 2008 to R667 million, an
improvement of 137%.
The tangible net asset value per share has increased by 13% to 169 cents
(2008: 149 cents).
Trading environment
In the current environment, consumers are increasingly discerning and value
conscious. The Group`s high profile CTM brand offers fashion and quality at
affordable prices and with constant review of the range, this brand succeeds
in appealing to a broad spectrum of consumers. During the reporting period,
the high volume first time home buyers market proved robust, with Black
consumers particularly, driving growth.
Increased quantities of Chinese product are available in the market. In an
effort to manage erratic supply, greater numbers of sector players are
purchasing directly from wholesalers. Given this volatility of imports versus
the superior quality of local product, the Group`s strategy has been to reduce
dependence on imports and benefit from stable relationships with local
suppliers, which ensures consistency of supply and quality.
Operational review
In June 2008 the Group announced that it had equity-incentivised its two top
performing Italtile store operators, with a view to harnessing the full
potential of the brand. This strategy has begun to deliver sound results, with
the brand reporting an improvement in turnover relative to the sector, and a
gain in market share.
The sustained drive to improve training and recruitment has resulted in
enhanced service delivery which has also benefited the brand. Investment in
the campaign promoting Italtile`s 40th anniversary has further served to raise
awareness of the brand.
Management is satisfied that this brand formula is reaching a level which can
be rolled out to expand the current network of seven stores.
Within CTM, in-house brand building has been a major focus during the review
period. High profile campaigns aimed at entrenching brands such as
Kilimanjaro, Tivoli Taps and Studio Ceramico have delivered sound results and
served to set the Group apart from peer retailers.
Skills development remains an important thrust for the Group. Ongoing
investment in training programmes is beginning to bear results, reflected by
the improvement in quality of management in Group-owned stores. Management is
cognisant that the staff in the organisation are critical to its success, and
subsequently will continue to drive training and mentorship programmes.
Improved systems and controls continued to be a focus. Enhancing efficiencies
aimed at improving the customer`s shopping experience is critical to the
success of the Group.
The Group`s fledgeling third brand, Top T, slots in strategically below the
CTM brand, and targets developing rural towns and smaller informal markets.
The introduction of Top T ensures the Group is represented across the consumer
spectrum, from entry-level to niche premium end.
The current network of 8 stores will be expanded as opportunities arise.
The Group continued to optimise its supply chain with the acquisition of an
interest in Ezeetile, a national manufacturer of adhesive, grout and related
products. This investment serves to secure the supply of product and provides
synergistic opportunities in the future.
Africa
The Group`s strategy in Africa is to build on existing relationships to
entrench the brand`s presence and further develop territories in the 14 sub-
equatorial store network.
At present the Group is evaluating opportunities in Zambia and Malawi where
the Master Franchise licenses have expired.
Australia
Despite extremely difficult trading conditions, the Group`s Australian
business, which comprises nine stores, produced an improved performance in the
final three months of the review period to deliver a small trading profit. The
model continues to be enhanced to leverage the operation`s potential.
Property portfolio
The Group currently trades out of 152 000 m2 of trading and warehouse space,
which at fair market value equates to R1,1 billion. Returns from this
portfolio are in line with the Group`s trading operations.
During the review period R35 million was invested in new sites, store upgrades
and relocations.
Investments
Notwithstanding strong cash reserves, the Group borrowed R227 million during
the year, with a view to making significant investments, quickly, should the
opportunity arise. The current market has seen a softening of land prices,
with further declines anticipated and the group is well positioned to benefit
from this as the industry rationalises further.
Prospects
The trading environment will remain challenging for the next financial year.
Management`s challenge will be to retain and grow market share and ensure that
the Group is well positioned to capitalise as the economy recovers.
Basis of preparation
The Preliminary Profit Announcement has been prepared in accordance with
International Financial Reporting Standards (IFRS) and are in compliance with
IAS 34, and is prepared on the historical cost basis, adjusted for the fair
value of certain assets and liabilities. The same accounting policies and
methods of computation have been applied as in the most recent annual
financial statements. Intra group transaction analysis has been introduced in
the segmental report in order to improve disclosure and make the report more
meaningful.
Dividend
The Group has maintained its dividend cover of three times.
The Board has declared a final dividend of 5 cents per share (2008: 8 cents),
which together with the interim ordinary dividend of 6 cents, produces a total
ordinary dividend declared for the year of 11 cents (2008: 12 cents), a
decrease of 8%.
Dividend announcement
The Board has declared a final dividend (number 86) of 5 cents per share to
all shareholders recorded in the books of Italtile. The last day to trade cum
the dividend will be Friday, 28 August 2009. The shares of Italtile Limited
will commence trading ex dividend from the commencement of business on Monday,
31 August 2009 and the record date will be Friday, 4 September 2009. Payments
will be made on Monday, 07 September 2009.
Share certificates may not be rematerialised or dematerialised between Monday,
31 August 2009 and Friday, 4 September 2009, both days inclusive.
For and on behalf of the board
G P E Ravazzotti
Chief Executive Officer
P D Swatton
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.
Johannesburg
11 August 2009
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 M Du Toit, S I Gama, G K A Morolo, D H Rabin,
G Zannoni** (*British **Italian)
Sponsor: BJM Corporate Finance (Pty) Limited
Refer to Italtile`s corporate website: www.italtile.com
Date: 11/08/2009 07:05:03 Produced by the JSE SENS Department.
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