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[August 2008]
Italtile Full Year Results
Italtile Ltd (Randburg, South Africa) reported a 7% increase in system-wide turnover to R2.77 billion (2007: R2.58 billion) for the year to June 2008. Price inflation was limited to 1.5%, reflecting real growth of 6% from the existing store network, as the group consolidated its market advantages and held back on price increases to benefit consumers.Reported trading profit increased by 2% to R399 million (2007: R393 million), which includes a once-off IFRS cost of R25 million associated with the IFRS 2 (Share based payments) expense of the transaction. Excluding the impact of this transaction reflects a normalised increase of 7.9% in trading profit. Increased financing costs of R14 million (2007: R2 million) resulted largely from property related borrowings.
During the second half of the financial year, the group was successful in decreasing inventories by 19% to R263 million (31 December 2007: R322 million) despite slower market demand, which is in line with historic levels. Cash reserves increased by R23 million to R281 million (2007: R258 million). Current ratio improved to 2.4 times (2007: 1.6 times) as the R73 million property borrowings released working capital to fund operations.
During the period, direct property investments and store enhancements totalling R126 million were concluded as the group continued to upgrade its stores. The tangible net asset value per share has increased by 22% to 149 cents (2007: 122 cents).
Pressure on consumers’ discretionary spending across all demographic segments, as a result of higher interest rates and rampant inflation, was evidenced in lower traffic across the store network. With decreased capacity to spend, customers’ buying decisions have become more conservative and focused on making quality purchases. This flight to quality plays to the group’s strengths, it reported, with its well established brands and service oriented culture.
Having identified a potential opportunity to supply the highly price-sensitive entry level market, Italtile launched a third brand, named Top T, during the year. At 30 June 2008, four group-owned stores had been established at group sites which were previously vacated due to relocations. Top T, which fits in strategically below CTM, will target developing rural towns and smaller markets. The brand is said to have good expansion prospects and leverages the group’s extensive buying power.
In order to harness the full potential of the Italtile brand faster, the two top performing store operators who have proven track records were incentivised with equity in the national Italtile brand. The group is confident that as shareholders, they will focus exclusively on growing the Italtile brand.
Italtile said it maintained the momentum with initiatives to consolidate its dominant position in the South African market. Projects to enhance systems and controls in the pursuit of a superior customer experience and to further improve in-store service levels are delivering benefits, especially as the cyclical downturn plays itself out. Focus was maintained on training and mentorship to grow and develop a pool of future store leaders. In addition, its skills transfer initiatives, which include the Tiling Academy, have been attended by approximately 800 individuals since inception.
www.italtile.com
ENDS