Wrap Text
Short form announcement for the six months ended 31 December 2019
Italtile Limited
Share code: ITE ISIN: ZAE000099123
Registration number: 1955/000558/06
Incorporated in the Republic of South Africa
("Italtile" or "the Group" or "the Company")
Short form announcement for the six months ended 31 December 2019
Highlights
System-wide turnover: R5,4 billion
2018: R5,3 billion
Up 1%
Trading profit: R1 029 million
2018: R968 million
Up 6%
Adjusted earnings per share*: 58,4 cents
2018: 55,4 cents
Up 5%
Earnings per share: 55,3 cents
2018: 55,4 cents
Remains constant
Net cash: R702 million
2018: R1,0 billion
Down 30%
Adjusted headline earnings per share*: 58,4 cents
2018: 54,7 cents
Up 7%
Headline earnings per share: 55,3 cents
2018: 54,7 cents
Up 1%
Ordinary dividend per share: 23,0 cents
2018: 22,0 cents
Up 5%
Store network 197
June 2019: 189
* Adjusted for the once-off charge of R39 million related to the Broad-based Black Economic Empowerment transaction
concluded with Yard Investment Holdings Proprietary Limited, as announced on SENS on 10 September 2019 and the
voluntary trading statement released on SENS on 7 February 2020.
"Notwithstanding the challenging external environment, management remains committed to optimising on the opportunities
within its control in the business to drive continued growth." Jan Potgieter, CEO
Contribution to Group profit before tax
Franchising Retail Manufacturers
2019: 20% 2019: 17% 2019: 36%
2018: 20% 2018: 19% 2018: 36%
Properties Supply and support services
2019: 15% 2019: 12%
2018: 15% 2018: 10%
OVERVIEW
Italtile is a manufacturer, franchisor and retailer of tiles, bathroomware and other related home-finishing products.
The Group's retail brands are CTM, Italtile Retail, TopT and U-Light, represented through a total network of 197 stores,
including five online webstores. The brand offering targets homeowners across the LSM 4 to 10 categories.
The retail operation is strategically supported by a vertically integrated supply chain, comprising key manufacturing
and import operations, and an extensive property portfolio.
The Group's dream is to become the best manufacturer and retailer of tiles, sanitaryware and ancillary products in
Africa, by offering an unrivalled shopping experience through the strategy of ensuring the right product, at the right
time, place and price.
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. In light of the unfavourable trading conditions and
weak consumer demand, management's key focus areas were to:
- compete vigorously to win market share;
- increase productivity and extract efficiencies;
- entrench a performance-driven culture; and
- continue to invest across the businesses.
OPERATIONAL REVIEW
Over the past reporting period management committed to delivering on a range of key priorities. Good progress was made
in attaining our goals, although opportunity exists for continued improvement:
- advance the store roll-out and revamp programme, and open 15 stores for the full year: 10 stores were opened in the
review period, with another five to eight to follow in the next six months. In total, 15 stores were revamped;
- focus on sales growth - specifically tile volumes. While overall sales growth did not meet our benchmark, tile
sales increased across the retail brands and market share was gained in a low-demand environment. This achievement
is pleasing recognition of the concerted effort to prioritise this key merchandise category, which contributes
approximately half of total retail revenue;
- prioritise the shopping experience through retail excellence disciplines and innovation. Across the brands,
independent customer surveys confirmed that the shopping experience, specifically range and presentation, continued
to improve and translate into sales;
- roll out of U-Light. The new lighting offering launched in the prior year is now represented by five pilot stores;
this footprint will determine the future viability and scalability of the model;
- improve manufacturing efficiencies. Both Ceramic and Ezee Tile reported sound results, derived from focus on
production efficiencies and cost management;
- extract synergies from the integrated supply chain. Intensified efficiencies resulted in all three of the Group's
supply chain import businesses recording pleasing growth; and
- entrench working capital and cash management as core disciplines. The cash conversion rate for the period was
disappointing, and despite substantial cash outflows, such as the special dividend, management believes there are
opportunities for improved working capital.
Retail brands
Instilling retail excellence disciplines throughout the business remained a key management priority. In a very
competitive market, the unwavering focus on improving the customer shopping experience was rewarded by a growth in
market share across the retail brands, Italtile Retail, CTM and TopT, while the Group's new offering, U-Light, started
to gain traction in an untapped category for the Group.
CTM: The improved performance reported is a reflection of the successful repositioning of the brand over the past year
and an enhanced focus on in-store presentation and range. Both sales and average basket value grew, although margin
pressure contained profitability. Measures to improve store productivity are underway and should reflect in the next
six to 12 months.
Italtile Retail: Revenue reported for the review period was flat and profits declined marginally. The business' average
basket value increased and margins were maintained. The disappointing sales performance is a reflection of the downturn in
investment by the shrinking upper-LSM market as the flight of capital continued, as well as the decline in the commercial
projects business as developments were deferred or cancelled for the foreseeable future.
TopT: Once again, the brand delivered double-digit sales and profit growth, albeit not at the levels achieved in previous
years. Margins were down, in keeping with the strategy to support cash strapped homeowners. An improvement in the average
basket value was recorded and store productivity rose. Continued investment in the range and presentation underpinned TopT's
gain in market share in a particularly difficult environment.
U-Light: As of October 2019, the Group's new lighting offering is now represented by five pilot stores, each comprising a
unique format and catering to a specific target market. In addition to the standalone U-Light stores, the offering is
available across the Group's TopT store network and aligns with management's strategy to offer customers a total solution.
The business broke even in the review period. Should the pilot project prove successful, the goal is to open up to five
U-Light stores per year.
SUPPLY CHAIN: MANUFACTURERS
The integration of Ceramic and Ezee Tile, acquired in October 2017, continued to deliver on management's strategy to
provide a complete solution to customers. Improved planning and production efficiencies benefited both the stores and the
factories and underpinned the Group's policy of ensuring the 'right product at the right time, place and price'.
Ceramic Industries
The acquisition of Ceramic some 20 months ago continues to deliver the gains envisaged, among them, a stronger combined
balance sheet for future expansion, and improved planning and production efficiencies, benefiting both the stores and
the factories.
Tile division: In South Africa, tile volumes and sales were under pressure due to weak demand, however, the business did well
to grow profits and margins through range rationalisation, improved efficiencies and cost management. This achievement is
particularly noteworthy given the direct loss of R12 million suffered as a consequence of load shedding during the review
period.
The business reported solid results in Australia, while export sales into the rest of Africa region declined slightly due
to the poor performance in certain markets including Zambia and Zimbabwe.
Bathroomware and baths: Solid results were reported by the bathroomware and bath division. In the forthcoming period, focus
will remain on reducing costs and improving yields.
Ezee Tile
This business turned around the unsatisfactory performance reported in the prior year as remedial measures took
effect; higher volumes and sales were recorded and margins and profitability grew.
SUPPLY CHAIN: IMPORTERS
All three of the import businesses, namely Cedar Point, International Tap Distributors and Durban Distribution reported
improvements in sales, profits and margins. Notwithstanding the late arrival of imported stock, the product quality,
mix and ratio of in-stocks improved. The establishment of three Cedar Point distribution centres in Gauteng, Cape Town
and KwaZulu-Natal also had a positive impact on logistics and distribution efficiencies across the Group and will provide
significant opportunities for leveraging the supply chain and extracting further synergies in the years ahead.
PROPERTY INVESTMENT
As at 31 December 2019, the estimated market value of the portfolio was R4.1 billion, comprising a retail portfolio
valued at R3.2 billion (2018: R3.0 billion) and a manufacturing portfolio valued at R0.9 billion (2018: R0.8 billion).
During the review period, capital expenditure of R165 million was incurred on an ongoing store upgrade programme, while
R113 million was invested on plant and equipment upgrades across the manufacturing operations.
PROSPECTS
While the prevailing 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. Growth in the second
half of the year is anticipated to be in line with the current review period.
In a projected environment of minimal top-line growth, the Group's key goals in the period ahead will be to:
- continue to compete aggressively to gain market share through better execution of retail excellence disciplines;
- improve management of stockholding and working capital; and
- optimise operational efficiencies and productivity in the stores, manufacturing and the supply chain as well as the
integration between the stores and supply chain.
ORDINARY CASH DIVIDEND ANNOUNCEMENT
The Board has declared an interim gross cash dividend (number 107) for the review period ended 31 December 2019 of
23.0 cents per ordinary share to all shareholders recorded in the shareholder register of Italtile as at the record
date of Friday, 6 March 2020.
In accordance with paragraphs 11.17(a)(i) to (x) and 11.17(c) of the Listings Requirements of the JSE ("JSE Listings
Requirements"), the following additional information is provided:
- The dividend has been declared out of income reserves;
- The local dividend withholding tax rate is 20% (twenty percent);
- The gross local dividend amount is 23.0 cents per share for shareholders exempt from the dividends tax;
- The net local dividend amount is 18.4 cents per share for shareholders liable to pay the dividends tax;
- The local dividend withholding tax amount is 4.6 cents per share for shareholders liable to pay the dividend tax;
- Italtile's income tax reference number is 9050182717; and
- The Group has 1 321 654 148 shares in issue including 9 824 614 shares held by the Italtile Share Incentive Trust,
62 919 081 shares held as BEE treasury shares and 15 951 126 shares held by Italtile Ceramics Proprietary Limited
("Italtile Ceramics").
TIMETABLE FOR CASH DIVIDEND
The cash dividend timetable is structured as follows: the last day to trade cum dividend in order to participate in
the dividend will be Tuesday, 3 March 2020. The shares will commence trading ex-dividend from the commencement of
business on Wednesday, 4 March 2020 and the record date will be Friday, 6 March 2020. The dividend will be paid on
Monday, 9 March 2020. Share certificates may not be rematerialised or dematerialised between Wednesday, 4 March 2020
and Friday, 6 March 2020, both days inclusive.
SHORT FORM ANNOUNCEMENT
The content of this short form announcement is the responsibility of the directors. Shareholders are advised that this
short form announcement represents a summary of the information contained in the full long form announcement which is
available at: https://senspdf.jse.co.za/documents/2020/JSE/ISSE/ITE/interims20.pdf and on Italtile's website at
https://www.italtile.com.
Any investment decisions made by investors and/or shareholders should be based on a consideration of the full
announcement as a whole and investors and shareholders are encouraged to review the full announcement, as detailed herein.
Both the short form and full announcement are also available for inspection at the registered offices of Italtile and
sponsor, Merchantec Capital, during business hours, and copies may be obtained at no cost on request from the Company
Secretary, who is contactable on +27 11 882 8200 or lizwillis@ejaysecretarial.co.za.
Registered office: The Italtile Building, corner William Nicol Drive and Peter Place, Bryanston
(PO Box 1689, Randburg 2125)
Transfer secretaries: Computershare Investor Services Proprietary Limited
Company Secretary: E J Willis
Sponsor: Merchantec Capital
Auditor: PricewaterhouseCoopers Inc.
www.italtile.com
Date: 13-02-2020 07:15:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
