| Thu 18 Feb 2010, 7:30 | | ITE - Italtile - Reviewed Group Results for the six months ended 31 December |
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ITE - Italtile - Reviewed Group Results for the six months ended 31 December
2009
ITALTILE LIMITED
Reviewed Group Results for the six months ended 31 December 2009
Share code: ITE
ISIN: ZAE000099123
Reg. no.: 1955/000558/06
Incorporated in the Republic of South Africa
("Italtile" or "the Group")
SYSTEM WIDE TURNOVER ANALYSIS
For the period ended 31 December 2009
(Rand millions unless otherwise stated)
Reviewed Unaudited Audited
year to
six months six months
to to
% 31 December 31 December 30 June
increase 2009 2008 2009
Group and franchised
turnover
- By group owned stores 692 667 1 303
- By franchise owned 744 722 1 268
stores (unaudited)
Total 3 1 436 1 389 2 571
ABRIDGED GROUP STATEMENTS OF COMPREHENSIVE INCOME
For the period ended 31 December 2009
(Rand millions unless otherwise stated)
Reviewed Unaudited Audited
year to
six months six months
to to
% 31 December 31 December 30 June
increase 2009 2008 2009
Trading profit before 222 214 403
depreciation
Depreciation (20) (20) (41)
Profit on sale of - - (1)
property, plant and
equipment
Trading profit 4 202 194 361
Investment income 20 25# 48
Profit before interest 222 219 409
paid
Interest paid (14) (22)# (40)
Profit before taxation 6 208 197 369
Taxation (59) (58) (109)
Profit for the period 7 149 139 260
Currency translation - (16) (12)
differences
Total comprehensive 149 123 248
income for the period
Attributable to:
Equity holders of the 143 136 257
parent
Non controlling 6 3 3
interests
7 149 139 260
Number of shares in 797 509 793 893 795 984
issue (000`s)*
Earnings per share 5 17,9 17,1 32,3
(cents)
Headline earnings per 5 17,9 17,1 32,4
share (cents)
Adjusted headline 5 17,9 17,1 32,4
earnings per share
(cents)
Diluted earnings per 5 17,9 17,1 32,3
share (cents)
Diluted headline 5 17,9 17,1 32,4
earnings per share
(cents)
Dividends per share 0 6,0 6,0 11,0
(cents)
RECONCILIATION OF
HEADLINE EARNINGS
Earnings attributable to 143 136 257
ordinary shareholders
Profit on sale of - - 1
property, plant and
equipment
Headline earnings 143 136 258
RECONCILIATION OF SHARES
IN ISSUE*
Total number of shares 909 800 909 800 909 800
issued (000`s)
Share Incentive Trust 24 291 27 907 25 816
shares (000`s)
BEE treasury shares 88 000 88 000 88 000
(000`s)
Shares in issue to 797 509 793 893 795 984
external parties (000`s)
# Re-stated for comparative purposes
ABRIDGED GROUP STATEMENTS OF FINANCIAL POSITION
As at 31 December 2009
(Rand millions unless otherwise stated)
Reviewed Unaudited Audited
year to
six months six months
to to
31 December 31 December 30 June
2009 2008 2009
ASSETS
Non-current assets 964 911 939
Property, plant and equipment 937 886 914
Other long-term assets 19 17 16
Goodwill 6 6 6
Deferred tax 2 2 3
Current assets 1 102 884 994
Inventories 173 224 191
Trade and other receivables 121 127 136
Cash and cash equivalents 808 533# 667
Total assets 2 066 1 795 1 933
EQUITY AND LIABILITIES
Capital and reserves 1 455 1 241 1 346
Stated capital 417 417 417
Non-distributable reserve 78 64 78
Treasury shares (470) (475) (473)
Retained profit 1,384 1,207 1,284
Non controlling interest 46 28 40
Long-term liabilities 341 331# 341
Deferred tax 2 2
Current liabilities 268 223 244
Trade and other payables 251 186 238
Taxation 17 37 6
2 066 1 795 1 933
Net asset value per share (cents) 182 156 169
# Re-stated for comparative purposes
CASH FLOW STATEMENT
For the period ended 31 December 2009
(Rand millions unless otherwise stated)
Reviewed Unaudited Audited
year to
six months six months
to to
31 December 31 December 30 June
2009 2008 2009
Cash flow from operating activities 184 65 223
Cash flow from investing activities (45) (46) (77)
Cash flow from financing activities 2 233 240
Net movement in cash and cash 141 252 386
equivalents
Cash and cash equivalents at 667 281 281
beginning of period
Cash and cash equivalents at end of 808 533 667
period
STATEMENT OF CHANGES IN EQUITY
For the period ended 31 December 2009
(Rand millions unless otherwise stated)
Non-
distri-
Stated butable Treasury Minority Retained
Group capital reserve shares interest profit Total
Balance at 30 June 417 80 (473) 25 1 134 1 183
2008
Total comprehensive (12) 3 257 248
income for the
period
Dividends paid (4) (107) (111)
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
Total comprehensive - 6 143 149
income for the
period
Dividends paid (43) (43)
Unallocated shares 2 2
in share trust
Accumulated surplus - -
in share trust
Balance at 31 417 78 (470) 46 1 384 1 455
December 2009
SEGMENTAL REPORTING
For the period ended 31 December 2009
(Rand millions unless otherwise stated)
Supply and
support
Retail Franchising Properties services Group
Reviewed period to
December 2009
Gross revenue 595 64 79 263 1 001
intra group - (26) (34) (150) (210)
transactions
Net revenue 595 38 45 113 791
Gross results 42 83 64 13 202
intra group 72 (26) (34) (12) -
transactions
Trading profit 114 57 30 1 202
Unaudited period to
December 2008
Gross revenue 567 63 75 275 980
intra group - (28) (35) (154) (217)
transactions
Net revenue 567 35 40 121 763
Gross results 37 79 60 18 194
intra group 73 (26) (35) (12) -
transactions
Trading profit 110 53 25 6 194
COMMITMENTS AND CONTINGENCIES
(Rand millions unless otherwise stated)
- There are no material contingent liabilities or assets at
31 December 2009
- Capital commitments at 31 December 2009
Contracted 12
Authorised, not contracted 95
107
- In terms of the articles of association, the company`s
borrowing facilities are unlimited.
COMMENTARY
RESULTS
The Group reported a 3% improvement in organic system wide turnover to R1,44
billion (2008:R1,39 billion) in line with retail sector trends and
management`s stated objective to retain and grow market share, capitalising on
opportunities as the economy recovers. Trading profit increased 4% from R194
million in the comparative period to R202 million.
Improved turnover was achieved with zero price inflation, reflecting the
competitive trading environment. While operating margin remained firm in the
tile division, the Group implemented an aggressive pricing policy in the
sanitaryware business, in keeping with its strategy to be regarded as a value
player across its one-stop-shop offering.
Earnings per share increased 5% per share to 17,9 cents (2008: 17,1 cents).
The Group`s cash reserves at the year ended 30 June 2009 were R667 million,
including domestic borrowings of R300 million. This loan strategy was employed
with a view to making expeditious investments in the property portfolio given
the softening of land prices and continued rationalisation of the industry.
The Group`s strong cash-generative ability is illustrated by the subsequent
further increase in cash reserves to R808 million (2008: R533 million).
Sustained intensive inventory management continued to reduce stock holding and
improve product mix for the fourth consecutive period. Inventories decreased
from R191 million in June 2009 to R173 million in the review period.
The tangible net asset value per share increased by 17% to 182 cents (2008:
156 cents).
OPERATIONAL REVIEW
Trading conditions remained challenging, illustrated by further
rationalisation of less robust, import-dependent industry participants.
Long-standing relationships with suppliers and investment in integrating the
supply chain continued to deliver benefits for the Group. Improved quality and
fashionability of local product has dramatically reduced dependence on imports
and thereby negated the effect of currency fluctuations and inconsistency of
supply and quality. The recent investment in Ezeetile, a national manufacturer
of adhesive, grout and related products, has added significant strategic
advantage and the business unit delivered a record performance over the peak
season trading period.
Notwithstanding the recessionary environment and restrained disposable income,
the Group benefited from its position as the leading value player with well
established brands. In CTM the emerging market sector continued to perform
well and modest market share was gained in the middle income urban market
during the last quarter, after a lengthy period of subdued consumer activity.
The Italtile stores experienced noticeably less customer traffic in the past
six months. Trends indicate that affluent clients were more price sensitive
and value conscious than previously, thereby pressuring new build and
renovation sales.
Comprising 8 stores, Top T is the Group`s fledgling brand. Management is
satisfied that in time this entry-level offering will establish a strong
foothold in the South African market. A conservative roll out programme will
commence in the next six months, and the existing network will be expanded as
appropriate opportunities arise.
Italtile is actively pursuing a programme to raise awareness of environmental
sustainability throughout the Group. Demonstrated by the construction of its
environmentally friendly Training Academy, efforts are being made to ensure
the Group`s stores are more self sufficient and resourceful in terms of energy
and water consumption. Henceforth all new stores will be built to comply with
environmentally responsible standards and existing stores will be modified
accordingly.
AFRICA
Italtile has 14 stores in 7 African countries. Given the current economic
environment, and the Group`s conservative stance to establishing a presence in
Africa, no further expansion of the store network was undertaken in the
reporting period.
AUSTRALIA
The Australian operation, comprising nine stores, delivered a good
performance, and made a commendable contribution to Group profit. The
turnaround achieved in this business is based on the strategy implemented over
several years to remedy logistical decisions made when the Group initially
entered the country. The Board is confident that the optimal trading model is
now in place to suit the unique Australian market and that this performance is
sustainable.
PROPERTY PORTFOLIO
The Group`s combined African and Australian portfolio has a carrying value of
R824 million (2008: R810 million). The strategic advantage of supporting its
brands with high profile destination sites ensures that opportunities to grow
this portfolio are continuously explored. The sector currently experiences a
softening in commercial property prices presenting acquisition opportunities.
Whilst the Group has a long term investment horizon, it is anticipated that an
aggressive relocation programme will be implemented over the next 18 months.
The Group`s traditionally selective approach to investments will ensure that
the property portfolio continues to deliver a sustainable, required return
rate.
DIRECTORATE
During the review period the non-executive directors Mr Derek Rabin and Mr
Giuseppe Zannoni retired. The Board expresses its sincere appreciation to Mr
Rabin and Mr Zannoni for their commitment and guidance to the Group during
their tenure and looks forward to continued relationships with them. Ms
Alessia Zannoni was appointed as a non-executive director. The Board welcomes
Ms Zannoni and looks forward to her future contribution.
PROSPECTS
The Group will invest in retail technologies to augment in-store trading
systems aimed at improving operational efficiencies and enhancing the shopping
experience.
The economic environment is generally expected to remain challenging over the
forthcoming period.
It is difficult to forecast the impact of 2010 World Cup activities on trading
in the next six months, and in particular in the months of June and July 2010.
Notwithstanding this uncertain economic climate, the Board believes that
growth at current levels will be maintained for the forthcoming period.
BASIS OF PREPARATION OF ACCOUNTING POLICIES
The reviewed interim financial results for the period are prepared in
accordance with IAS 34 - Interim Financial Reporting, IFRS and comply with the
Listings Requirements of the JSE Limited and the South African Companies Act,
1973.
The accounting policies applied in these unaudited interim financial
statements are consistent in all material respects with those applied in the
preparation of the group`s annual financial statements for the previous year
ended 30 June 2009 except for the adoption of new standards and
interpretations. The following two standards had an impact for the half year-
ended 31 December 2009. Other standards and interpretations that were issued
did not have any impact on the entity.
- IAS 1 (Revised) Presentation of Financial Statements - The group has adopted
IAS 1 (Revised) which is effective for financial periods beginning on or after
1 January 2009. The amendment mandates requirements for the presentation of
financial statements on the basis of shared characteristics.
- IFRS 8 Operating segments - The group has adopted IFRS 8 Operating Segments
which is effective for financial periods beginning on or after 1 January 2009.
This standard requires the disclosure of information based on the "management
approach" to reporting on the financial performance of operating segments.
ORDINARY DIVIDEND
The Group has maintained its dividend cover of three times. The Board has
declared an interim dividend of 6 cents per share (2008: 6 cents).
ORDINARY DIVIDEND ANNOUNCEMENT
The Board has declared an interim dividend (number 87) of 6 cents per ordinary
share to all shareholders recorded in the books of Italtile Limited at the
close of business on Friday, 26 March 2010. The last day to trade cum dividend
in order to participate in the dividend will be Thursday, 18 March 2010. The
shares will commence trading ex dividend from the commencement of business on
Friday, 19 March 2010 and the record date will be Friday, 26 March 2010. The
dividend will be paid on Monday, 29 March 2010. Share certificates may not be
rematerialised or dematerialised between Thursday, 18 March 2010 and Friday,
26 March 2010, both days inclusive.
SPECIAL CASH DIVIDEND
Given the cash holding in the Company excess to requirements, the Board has
furthermore declared a special dividend of 60c per ordinary share payable to
shareholders, with the default being cash but who will have the option to
choose to acquire additional shares at 325 cents per share in lieu of the
special cash dividend, or to elect a combination of both cash and shares. The
special dividend will also have the effect of assisting the Company`s BEE
partners in lowering their debt owed for the initial share acquisition. The
number of shares to be awarded will be calculated by dividing 60 cents per
share by 325 cents (EX dividend), multiplied by the number of shares held by a
shareholder on the record date. This equates to 18.4615 shares for every 100
ordinary shares held. The last day to trade CUM dividend in order to
participate in the dividend will be Thursday, 18 March 2010. The shares will
commence trading EX dividend from the commencement of business on Friday, 19
March 2010 and the record date will be Friday, 26 March 2010. The dividend
will be paid on Monday, 29 March 2010. Share certificates may not be
rematerialised or dematerialised between Thursday, 18 March 2010 and Friday,
26 March 2010, both days inclusive. A form of election will be posted to
shareholders in due course.
For and on behalf of the board
G P E Ravazzotti P D Swatton
Chief Executive Officer Chief Financial Officer 18 February 2010
The results have been reviewed by Ernst & Young and their unqualified review
opinion is available on request from the company secretary at the companies`
registered office or own address.
Registered Office: The Italtile Building, cnr William Nicol Drive and Peter
Place, Bryanston (PO Box 1689, Randburg 2125)
Transfer Secretaries: Computershare Investor Services (Pty) Limited, 70
Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107)
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 Morolo, **A Zannoni
(*British??** Italian)
Company Secretary: E J Willis
Sponsor: BJM Corporate Finance (Pty) Ltd
Refer to Italtile`s corporate website: www.italtile.com
Date: 18/02/2010 07:30:01 Produced by the JSE SENS Department.
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