| Thu 6 Sep 2001, 0:00 | | Tile Africa - Financial Results |
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Tile Afrika Holdings Limited
Registration number: 1998/017716/06
Alpha code: TLF
ISIN number: ZAE 0000 17604
Audited results for the year ended 30 June 2001
Revenue up 25,2%
Operating income up 33,3%
Net tangible asset value up 34,4%
Abridged group income statement
Audited Audited
Year ended Year ended
30 June 30 June
2001 2000
R'000 R'000
Revenue 254 635 203 315
Owned stores 247 670 189 437
Franchised stores 6 965 13 878
Operating income 22 460 17 107
Finance costs (3 114) (1 045)
Net income before taxation 19 346 16 062
Taxation 2 840 (4 657)
Current (2 421) (1 705)
Deferred 5 261 (2 952)
Net income after taxation 22 186 11 405
Minority interest - (186)
Earnings attributable to ordinary
shareholders 22 186 11 219
Abridged group balance sheet
Audited Audited
30 June 30 June
2001 2000
R'000 R'000
Assets
Non-current assets 20 355 12 502
Fixed assets 12 578 11 803
Intangible asset 2 316 499
Deferred taxation 5 461 200
Current assets 89 141 90 488
Cash resources 204 3 414
Total assets 109 700 106 404
Equity and liabilities
Capital and reserves
Ordinary share capital and reserves 60 917 40 231
Minority interest - 186
Non-current liabilities 1 396 1 750
Current liabilities 47 387 37 753
Bank overdraft - 26 484
Total equity and liabilities 109 700 106 404
Abridged group cash flow statement
Audited Audited
Year ended Year ended
30 June 30 June
2001 2000
R'000 R'000
Cash flows from operating activities 29 309 (9 931)
Cash flows from investing activities (5 833) (8 279)
Cash flows from financing activities (202) 1 223
Net movement in cash and cash equivalents 23 274 (16 987)
Cash and cash equivalents at beginning
of year (23 070) (6 083)
Cash and cash equivalents at end of year 204 (23 070)
Abridged statement of changes in equity
Audited Audited
Year ended Year ended
30 June 30 June
2001 2000
R'000 R'000
Balance at beginning of year 40 231 25 860
Effects of changes in accounting policy - 200
40 231 26 060
Net income for the year 22 186 14 171
Less: Dividend (1 500) -
Balance at the end of the year 60 917 40 231
Supplementary information
Audited Audited
Year ended Year ended
30 June 30 June
2001 2000
R'000 R'000
Dividend per share (cents) 2,5 -
Earnings per share (cents) 37,0 18,9
Ordinary shares issued ('000) 60 000 60 000
Net tangible asset value per
share (cents) 88,6 65,9
Commentary
Introduction
In the two years since listing, Tile Afrika Holdings Limited ("Tile Afrika"
or "the group") has grown from strength to strength. The group's value
proposition has met with an overwhelmingly positive response and the
directors are proud to present yet another impressive set of results for the
year ended 30 June 2001.
Whilst others operating in the retail sector of the economy have reported
difficult trading conditions resulting from decreased disposable income as a
result of increased spending on gambling and cellphones, Tile Afrika has not
experienced any noticeable downturn.
South Africans are a house-proud nation and, irrespective of their income,
tend to invest in their homes. Tile Afrika is positioned in a market that is
in many ways immune to interest rate fluctuations and 85% of the group's
income is from the do-it-yourself sector of the retail market.
At the end of the last financial year Tile Afrika made large strategic
purchases and had enough stock to carry the group over the current year. The
group will continue to balance its purchases between international and local
sources to deflect the effects of the declining rand, enabling it to once
more make substantial purchases and enjoy the benefits of efficient buying.
Financial review
The financial statements have been prepared on the basis of a going concern
in accordance with South African Statements of Generally Accepted Accounting
Practice (GAAP). The accounting policies used are consistent with those used
in the previous year, with the exception of deferred taxation which has been
adjusted to comply with GAAP. The comparative figures have been restated to
account for this change in accounting policy, where appropriate. The
directors are confident that the group has sufficient resources to continue
operations for the foreseeable future.
Tile Afrika is built on the premise that there is a large niche in the mass
market for value for money, quality, mid-range ceramic tiles and
sanitaryware. The validity of this premise has proved itself over the last
two years and Tile Afrika's strategy of buying and selling in volume and of
passing all value onto the customers, whilst retaining a stable margin for
itself has seen the business grow from an annual revenue of R203 million in
the 2000 financial year, to R255 million in 2001, an increase of 25,24%.
The group is particularly proud of the 30,74% growth in revenue to R248
million (2000: R189 million) from its owned stores. The contribution from
franchises declined by 49,8% in line with the strategy to migrate all
agreements from "50/50 partnerships" to fully fledged franchises, which has
met with positive response from all parties.
Operating income grew by 31,29% to R22,5 million (2000: R17,1 million) and
cash flows from operating activities grew to R29,3 million (2000: -R9,9
million) as a result of effective and efficient working capital management.
The change in accounting policy to comply with GAAP regarding deferred
taxation resulted in net income after taxation rising 94,53% to R22,2
million (2000: R11,4 million). Earnings per share also grew 95,76% to 37,0
cents per share (2000: 18,9 cents per share) after restating the 2000
earnings per share of 23,6 cents to take into account the change in
accounting policy.
The increase in intangible asset is as a result of the acquisition of a
subsidiary.
The group's net tangible asset value per share increased by 34,45% to 88,6
cents per share (2000: 65,9 cents per share).
Review of operations
Through the group's four divisions Tile Afrika has positioned itself as the
leading value for money ceramic tile and sanitaryware brand.
Tile Afrika Cash 'n Carry
The division saw a period of consolidation after the years of rapid
expansion. Many branches have now entered their second or third year of
operation and have shown increased profitability and strong organic growth.
During the review period, ranges were standardised and stocks were moved
which generated impressive returns. Both local and offshore suppliers were
consolidated and whilst there are now fewer suppliers, the division has a
bigger range with improved continuity.
San Afrika Cash 'n Carry
During the year, San Afrika sourced a number of new suppliers, which has
enabled the division to offer the market an extended range at more
competitive prices. Approximately 70% of products are sourced locally, which
has negated the effects of the declining exchange rate.
Much emphasis was placed on advertising and customer service during the year
and the San Afrika brand is establishing its own identity as a provider of
superior service and value for money, quality products. Time and resources
were also spent on product knowledge and technical training for all staff to
enhance the service San Afrika offers its clients.
Tile Afrika Projects
The division met all forecasts despite having fewer contracts in the period
under review, as the projects it was involved with were larger than the
usual work undertaken. The market experienced a decline in growth, but was
generally steady and is expected to grow in the year ahead.
Tile Afrika Projects completed fifteen developments in the period under
review as well as various other smaller projects.
Tile Afrika Franchisees
During the year only one new branch was opened and much energy was spent on
operational and procedural issues to position the division for rapid
expansion in the years ahead. The launch of the branch in George was the
most successful opening the group has ever seen and serves as a model for
all future launches. The market's response has been excellent and the store
is expected to do well.
The franchise agreement was updated in the review period to incorporate
industry best practices. The operational manual has been completely reviewed
and now offers a comprehensive, stand-alone guide to running a successful
Tile Afrika franchise.
A centralised IT system was implemented in the review period, which assists
Tile Afrika Franchisees in identifying potential problem areas within its
branches and proactively acts to eliminate them.
Prospects
Tile Afrika plans to focus on those value drivers that create long-term
sustainable shareholder value.
The group's branding and marketing campaigns will further entrench its image
as a value for money, quality product and value added service provider. Its
buying practices will be even further refined and its retail strategy will
see the opening of an additional thirteen Tile Afrika and thirteen San
Afrika stores in the upcoming financial year.
Tile Afrika has substantial upside growth potential within the current
organic growth pattern. San Afrika has the capacity to grow in line with
Tile Afrika's historic growth patterns and is viewed as a future value
driver. The group is also currently investigating a third retail concept and
the first satellite store could open within the next eighteen months.
As a retailer the group appreciates the value the in-store sales person
adds, and intends to develop a culture of retail excellence that will set
Tile Afrika apart from its competitors. By adding value to the sale the
group intends to deliver sustainable shareholder value over and above the
real, above inflation returns Tile Afrika has delivered in the past.
Dividend
The directors have resolved to declare a dividend (number 1) of 2,5 cents
per share to all shareholders registered in the books of Tile Afrika. The
last date to trade ("CUM" the dividend) in order to participate in the
dividend will be Friday, 19 October 2001. The shares of Tile Afrika will
commence trading "EX" dividend from the commencement of business on Monday,
22 October 2001 and the record date will be Friday, 26 October 2001 and will
be paid on Monday, 29 October 2001. No rematerialisation or
dematerialisation orders of Tile Afrika will be processed during the period
Monday, 15 October 2001 to Friday, 26 October 2001, both days inclusive.
Audit opinion
The financial statements have been audited by the external auditors, Horwath
Leveton Boner, in conformity with statements of South African Auditing
Standards, and have not qualified their opinion.
For and on behalf of the board
V Leonardi SJDS Rego Johannesburg
Executive Chairman Managing Director 6 September 2001
Registered office:
Tile Afrika Holdings Limited
181 Houthammer Road
Devland 2013
Transfer secretaries:
Computershare Services Limited
4th Floor, Edura House
41 Fox Street
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Directors:
V Leonardi* (Chairman)
SJDS Rego (Managing)
IAI Kara (Financial)
RW Heunis (Non-executive)
*Italian
