Wrap Text
Reviewed Condensed Group Results for the year ended 30 June 2024 and Cash Dividend Declaration
Italtile Limited
Incorporated in the Republic of South Africa
(Registration number: 1955/000558/06)
Share code: ITE
ISIN: ZAE000099123
("Italtile" or "the Group")
REVIEWED CONDENSED GROUP RESULTS
FOR THE YEAR ENDED 30 JUNE 2024 AND CASH DIVIDEND DECLARATION
"Significant change in the structure of the competitive landscape - in both the tile retail
and manufacturing industries - has resulted in the emergence of numerous new competitors.
In this context, aggravated by weak consumer demand, our primary focus is on improving the
Group's competitive position to retain our industry leadership through our robust retail and
manufacturing assets and teams. This translates to being more competitive and efficient at
every customer satisfaction touchpoint: fashion, range, price, service and quality. In our
goal to remain industry leaders, we will continue to unlock and extract value from
within our business through our unrelenting drive for efficiencies and cost leadership."
- Lance Foxcroft, Chief Executive Officer
HIGHLIGHTS
- System-wide turnover of R11,5 billion
(2023: R11,5 billion)
- Trading profit down 11% to R2,1 billion
(2023: R2,3 billion)
- Earnings per share down 8% to 122,1 cents
(2023: 132,6 cents)
- Headline earnings per share down 7% to 123,0 cents
(2023: 132,3 cents)
- Store network down 4% to 208
(2023: 216)
- Ordinary dividend per share down 8% to 49,0 cents
(2023: 53,0 cents)
- Special dividend per share up 100% to 78,0 cents
(2023: nil cents)
- Total dividend per share up 140% to 127,0 cents
(2023: 53,0 cents)
- Net asset value per share up 10% to 707,5 cents
(2023: 641,8 cents)
- Cash and cash equivalents up 76% to R1,8 billion
(2023: R1,0 billion)
OVERVIEW
Founded in 1969, Italtile Limited is a proudly South African manufacturer, franchisor and
retailer of tiles, bathroomware and other complementary home-finishing products. The Group's
retail brands are CTM, Italtile Retail and TopT, represented through a total network of 208
stores, including six online webstores. The retail operation is supported by a vertically
integrated supply chain comprising key manufacturers and import operations and an extensive
property portfolio.
TRADING ENVIRONMENT
During the Review Period, the cost of living crisis weighed heavily on consumers; demand was at
low levels across the industry; and shipping costs and container capacity were volatile due to
geo-political tensions. Significantly, the structure of the competitive landscape changed, with
the emergence of new aggressive competitors in both the tile manufacturing and retail sectors.
Now, Southern African tile manufacturing production capacity far exceeds demand. As a result,
SADC manufacturers are resorting to predatory pricing in South Africa, in a bid to penetrate
the market. This has intensified rivalry among retailers competing for market share in a sector
where prices have persistently declined over the year. Inevitably, this deflationary pricing has
had a severe impact on margins across the industry. It is likely that these poor margins will
result in consolidation among players and rationalisation of capacity in the market in due course.
GROUP PERFORMANCE
While our retail operation's full-year results were slightly lower than the prior comparable
year, the division recovered market share and performed better in the second half of the period
than the first half, extracting benefits through an uncompromising focus on operational
excellence and reducing costs.
In the manufacturing division, Ceramic achieved improvements in manpower, systems, quality and
product range. However, the business failed to grow tile volumes and improve capacity
utilisation to reduce the cost base and improve profitability.
The decline in Group profits reported in December, primarily caused by Ceramic's poor
performance, was slowed - although not reversed. Trading profit for the full year decreased
by 11% to R2,1 billion (2023: R2,3 billion), an improvement from the 17% decline reported at
half-year. Trading profit in the second half was only slightly lower than the prior comparable
period.
The Group's cash balance grew to R1 844 million (2023: R1 049 million). In light of strong cash
generation and cash reserves being in excess of operational requirements, a special dividend of
78,0 cents per share has been declared per the dividend announcement.
In the period under review, management's intense focus was on our 'fighting-fit' mantra:
interrogating and leveraging opportunities related to our people, products and processes.
The fiercely competitive trading environment tested the resilience and resourcefulness of our
operators, and it is gratifying to report that our regular customer sentiment surveys confirmed
our customers' loyalty to our brands and their satisfaction with our offering and service.
Our franchise network is healthy and all of our stores remain profitable. We value the
contribution our partners make and we work hard to nurture our relationship with them.
Throughout this year, our strategic objectives were centred on executing operational excellence
across our retail and manufacturing assets to help us to drive growth in the business.
Group-wide, we focused on developing our teams: TopT's regional management capability was
restructured and CTM's senior retail management structure was bolstered. The management and
operations team at Ezee Tile was capacitated and aligned with technology changes implemented,
and key positions at Ceramic were filled.
In the retail division our focus was on growing TopT sales; turning around CTM's performance;
optimising our East Africa node; and growing the contribution to total sales of our online
platform.
Good success was achieved, with a pleasing performance reported by TopT and positive metrics for
our online webstores. Unfortunately, CTM's mass-middle market customers continued to experience
severe financial pressure and sales did not meet our expectations, although solid progress was
made on ensuring the business is agile and competitive. We are confident that, if the basic
retail excellence disciplines continue to be actively implemented, sales and profits will grow
when consumer discretionary spend and sentiment improve.
The results delivered by our East Africa node were disappointing. While we are optimistic about
the prospects for the Kenyan operation, given general instability, the Group will adopt a
cautious approach to further expansion in the East Africa region. Our priority focus will be on
extracting value from the existing footprint of 14 stores, including two webstores.
In the manufacturing division we focused on improving efficiencies at Ezee Tile; turning around
Ceramic's performance and ensuring resource security by resolving the threat to natural gas
supply.
Completion of commissioning of Ezee Tile's new flagship facility at Vulcania is a stand-out
highlight of the period. The operation is now realising cost and efficiency benefits that
resulted in pleasing double-digit increases in sales and profits. Remedial measures implemented
at Ceramic have also produced a better operational performance: the new senior management team
is functioning well; additional fashionable products have been launched; quality systems have
been enhanced; and costs have been reduced. Despite these operational improvements,
sales declined in the reporting period. Trading conditions in Southern Africa continued to
deteriorate and the excess capacity in this region worsened substantially. Under our
fighting-fit mantra, our overriding goal is to regain market share that has been lost in the
current price war, reduce costs further and improve efficiencies to ensure Ceramic remains
competitive and relevant.
At the half-year, we noted that Sasol, the primary supplier of imported piped natural gas ("PNG")
had announced that as of June 2026, they will no longer be in a position to supply the market.
Sasol subsequently announced on 20 August 2024, that supply would be extended to at least
June 2027. While this extension is welcomed, approximately 70% of Ceramic's total energy
requirements are supplied by PNG and hence securing sustainable supply of viably priced energy
remains a key management priority. With the clear mandate from the Board of Directors ("Board")
to ensure business continuity, we have conducted exhaustive research and investigations into an
array of alternatives to replace Sasol's supply.
While gas is our preferred choice of fuel, in the event viably priced natural gas is not
available, a project has been approved to invest in and convert a production line to use
coal-based synthetic gas for heating and firing and to test this established technology in our
process, using our raw materials.
DECLARATION OF ORDINARY AND SPECIAL CASH DIVIDEND
The Group's dividend cover is two and a half times. The Board has declared a final gross
ordinary cash dividend (number 116) for the year ended 30 June 2024 of 22,0 cents per share
(2023: 21,0 cents) out of income reserves to all shareholders of Italtile as at the record
date of Friday, 13 September 2024. The dividend per share is calculated based on 1 321 654 148
shares (2023: 1 321 654 148 shares) in issue at the date of dividend declaration. The local
dividend withholding tax is 20% (twenty percent). The net local dividend amount is
17,6 cents per share for shareholders liable to pay dividends tax and 22,0 cents per share for
shareholders exempt from paying dividends tax. The total gross ordinary cash dividend for the
year amounts to 49,0 cents per share (2023: 53,0 cents).
A gross special cash dividend (number 8) of 78,0 cents per share (2023: nil) has also been
declared. The net special dividend amount is 62,4 cents per share for shareholders liable to
pay dividends tax and 78,0 cents per share for shareholders exempt from paying dividends tax.
Italtile has obtained the relevant South African Reserve Bank approval in respect of the special
dividend, and the Board has reasonably concluded that the Group will satisfy the solvency and
liquidity test immediately after distribution thereof and for the next 12 months.
Italtile's income tax reference number is 9050182717.
Dividend declaration date Monday, 26 August 2024
Last day to trade cum the dividend Tuesday, 10 September 2024
Date to commence trading ex-dividend Wednesday, 11 September 2024
Record date Friday, 13 September 2024
Payment date Monday, 16 September 2024
Share certificates may not be dematerialised or rematerialised between
Wednesday, 11 September 2024 and Friday, 13 September 2024, both dates inclusive.
KEY FOCUS AREAS
Continued execution of operational excellence will enable us to capitalise on opportunities in
the business. We believe modest growth in the retail division is attainable and in our
manufacturing operation, Ezee Tile will continue to improve turnover and profitability. We
expect the highly competitive environment to continue to be a challenge to Ceramic's
performance.
In the retail division, we aim to:
- open five new TopT stores as we continue to expand the brand's national footprint and grow
sales volumes;
- turn around CTM's performance by leveraging the brand's long-standing iconic status in the
industry and continue to differentiate the value proposition in the highly competitive
mass-middle market; and
- continue to improve our digital experience and grow our webstores' sales.
In the manufacturing division:
- Ezee Tile will target increased market share in the specifications and projects segment and
further improve efficiencies and reduce costs to increase profitability;
- management will aggressively reduce costs and improve efficiencies in Ceramic's operation
to recover margins and offset some of the significant price deflation in the market. We will
continue to strive to reclaim market share by optimising the value proposition of our
ranges and differentiating on high-fashion items; and
- resolving the threat to natural gas supply will remain a key priority to ensure Ceramic's
business continuity. Work on an industrial scale project to trial an alternative solution
will be started in the current financial year.
PROSPECTS AND OUTLOOK
The trading environment will remain extremely challenging in the short term. Competition in both
the manufacturing and retail segments will likely intensify until the vast imbalance between
excess manufacturing supply and weak demand levels out. Despite this concern, we are mildly
optimistic about prospects for growth in the market. South Africa is under-housed and the
dynamics of the housing market are favourable - evidenced by a young, growing, upwardly mobile
demographic with a strong popular culture of owning a home.
Key to conditions improving will be the sustained downward trend of inflation and an improvement
in consumer investment sentiment. The possibility of an interest rate reduction cycle starting
in the current calendar year should further boost disposable income and confidence, while
implementation of the two-pot retirement system in September may provide an injection of cash
into the economy. If load-shedding remains manageable and support for the GNU holds firm, it is
also likely that the currency will stabilise and investors and customers will adopt a more
positive stance.
Irrespective of the external challenges, our focus will remain on the internal levers within our
control. Our goal is to ensure that the business is fighting-fit and we are determined to
succeed in improving our competitiveness across all our operations. We are confident that we
have assets to achieve that: competent, engaged and motivated teams, robust iconic brands,
industry-leading technology and products and the competitive advantage of a vertically integrated
supply chain.
23 August 2024
RESULTS ANNOUNCEMENT
The content of this results announcement is the responsibility of the Board. Shareholders are
advised that this announcement represents a summary of the information contained in the full
announcement which has been released on SENS and is available on the JSE cloudlink:
https://senspdf.jse.co.za/documents/2024/jse/isse/ite/ye24.pdf and on Italtile's website at
https://italtile.com/sens-announcements.php.
This results announcement was published on SENS on Monday, 26 August 2024.
The condensed Group results for the year ended 30 June 2024 were reviewed by
PricewaterhouseCoopers Inc. ("PwC"), who expressed an unmodified review conclusion thereon.
Shareholders are advised that, in order to obtain a full understanding of the nature of the
auditor's engagement, and more specifically, the nature of the information reviewed, they should
obtain a copy of PwC's report available at the following link:
https://www.italtile.com/reports-and-results.php or from the Company Secretary who is contactable
on +27 11 325 6363 or roxanne@acorim.co.za.
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.
Registered office: The Italtile Building, 72 Peter Place, Bryanston, 2021
Postal address: PO Box 1689, Randburg, 2125
Transfer secretaries: Computershare Investor Services Proprietary Limited
Company Secretary: Acorim Proprietary Limited Sponsor: Merchantec Capital
Auditor: PricewaterhouseCoopers Inc.
www.italtile.com
Date: 26-08-2024 07:15:00
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