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Corporate governance

King IVTM

Italtile believes that the application of effective governance is essential to establishing an ethical and successful organisation which creates sustainable value for its stakeholders, and welcomes the latest update of the King Code of Governance PrinciplesTM ("King IVTM"). King IVTM was published on 1 November 2016, and its outcome-driven approach to corporate governance aligns with Italtile's existing governance framework and commitment to sustainable value creation and continuous improvement.

The Group subscribes to the Institute of Directors' Governance Assessment Instrument ("IoDSA GAI"), and the following summary report on the application of King IVTM is extracted from the IoDSA GAI, with the full assessment of all principles of King IVTM included on the Italtile website, www.italtile.com.

Corporate governance diagram

In accordance with the Listings Requirements of the Johannesburg Securities Exchange Limited and King IVTM, the table below provides further detail on assessment of Italtile's application of the governance principles as recommend by King IVTM This table should be read in conjunction with additional corporate governance and other disclosures provided in this Integrated Annual Report. The Italtile Board recognises that these assessments are the initial steps on a journey to align practices to support the various principles of King IVTM and commits to continuous improvement in this regard.

Leadership, ethics and corporate citizenship

King IVTM principle     Affirmation statement     Application     Focus area
Leadership
Principle 1:
Leadership
    The Italtile Board leads ethically and effectively.    
  • The Board is committed to high standards of corporate governance and ethics, and is the primary custodian of the Group's values and culture.
  • The Board's roles and responsibilities are set out in its Charter which include, inter alia, providing effective leadership that stands on an ethical foundation, oversight of the Group's ethics policies, and ensuring that the Group's ethics are managed effectively.
  • In fulfilling its duties, the Board ensures that all its members act with integrity and competence, are transparent and fair, and are individually and collectively responsible and accountable.
  • The Board completes an annual self-evaluation which is reviewed by the Chairman, with no areas of concern being noted during the most recent evaluation.
  • Declaration of interests is a standing agenda item for each Board meeting.
   
  • The Board is to establish a formal induction policy and a stakeholder engagement policy.
  • The Board is to develop and complete an annual attestation relating to the roles and responsibilities set out in the Board Charter. Consideration will also be given to external board evaluation processes.
Organisational ethics
Principle 2:
Organisational ethics
    The Italtile Board governs the ethics of Italtile in a way that supports the establishment of an ethical culture.    
  • The Board Charter mandates the Board to review, approve, monitor and evaluate the strategy proposed by management, while simultaneously monitoring the Group policies in place.
  • The Group's culture, value and Business Conduct Policy form an integral part of its strategy and success.
  • Reports from the Group's whistle-blowing line as well as the annual employee engagement survey are reviewed by the Board. Such reports detail allegations and findings, and management's response to or remediation thereof.
  • The Board is assisted in the execution of these duties by its Social and Ethics Committee, as well as its Audit and Risk Committee.
  • The promotion and preservation of the corporate culture and values, which is underpinned by high ethical standards, is delegated by the Board to its executive directors.
  • Employees of the Group undergo ethics-related training, most recently Competition Law training for senior management.
   
  • Senior management of the Group will undergo diversity training.
  • Consideration will also be given to formalisation of a supplier code of conduct.
Responsible corporate citizenship
Principle 3:
Responsible corporate citizenship
    The Italtile Board ensures that Italtile is, and is seen to be, a responsible corporate citizen.    
  • Italtile is committed to being a responsible corporate citizen and the Board ensures that the company pursues its activities within the confines of social, environmental and governance responsibilities as legislated or otherwise. In establishing its strategy, the Board considers the impact of its activities on the business, communities, stakeholders and the environment.
  • The Board has tasked the Social and Ethics Committee with overseeing responsible corporate citizenship, which also monitors compliance with the UN Global Compact principles.
  • The Group has a full time Corporate Citizenship Manager who oversees projects related to environmental initiatives (such as water preservation and renewable energy), community upliftment (including renovation of ablutions at primary schools) and other charitable activities.
  • The Group has further established the Italtile and Ceramic Foundation Trust, which is a Broad-Based Black Ownership Scheme, with the objective of carrying on public benefit activities in a non-profit manner and with an altruistic and philanthropic intent, focusing on education, sport and conservation.
   
  • The Corporate Citizenship Manager's role framework will be presented to the Social and Ethics Committee for review and approval.

Strategy, performance and reporting

King IVTM principle     Affirmation statement     Application     Focus area
Strategy and performance
Principle 4:
Strategy and performance
    The Italtile Board appreciates that Italtile's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.    
  • The Board delegates the detailed formulation and implementation of the Group's strategy to management.
  • The Board reviews, approves, monitors and evaluates the implementation of the Group's strategy. The strategy is revisited and debated annually in detail at a two-day breakaway session attended by the Board and members of the Group's Executive Committee and senior management.
  • In approving the strategy, the Board ensures a sustainable alignment of the Group's business model, strengths, weaknesses and opportunities.
  • The Board evaluates performance of strategy implementation with reference to both financial and non-financial outcomes, to ensure that sustainable value creation is achieved.
  • Progress against strategy is reported by the Chief Executive Officer quarterly.
     
Reporting
Principle 5:
Reporting
    The Italtile Board ensures that reports issued by Italtile enable stakeholders to make informed assessments of the organisation's performance, and its short, medium and long-term prospects.    
  • The Board, assisted by the Audit and Risk Committee, ensures that reports are compliant with legal reporting requirements and timeously meet the reasonable and legitimate needs of the Group's stakeholders. Further, the Board, again assisted by the Audit and Risk Committee, ensures that the necessary controls are in place to verify the integrity of disclosed reports, and makes use of the Group's enterprise risk matrix as a basis for determining material items for disclosure.
  • Reports prepared by the Group, all of which are reviewed and approved by the Board prior to publication, include:
    • Integrated Annual Report and annual financial statements;
    • King IVTM corporate governance disclosures
    • Interim financial reports; and
    • Trading updates (including voluntary statements) and other announcements on SENS as required by the JSE Listings Requirements.
  • The Board ensures that all relevant stakeholders have access to its published reports, with this responsibility being delegated to management.
     

Governing structures and delegation

King IVTM principle     Affirmation statement     Application     Focus area
Primary role and responsibilities of the Board
Principle 6:
Primary role and responsibilities
    The Italtile Board serves as the focal point and custodian of the organisation's corporate governance.    
  • The Board has overall responsibility for corporate governance across the Group.
  • The Board is supported by its four sub-committees (Audit and Risk Committee, Social and Ethics Committee, Nominations Committee and Remuneration Committee) whose chairpersons provide feedback at Board meetings.
  • The roles and responsibilities of the Board is contained in its Charter, with each sub-committee having its own charter which is reviewed annually.
  • Although the Board retains overall responsibility for the Group, it delegates the management of the day-to-day operations of the Group to the executive directors, who operate according to a delegation of authority framework.
  • The executive directors of the Board are either members of subsidiary boards or attend by invitation to ensure consistent application of the Group's overall strategy and governance.
   
  • The delegation of authority framework is to be revisited and updated by the Board, and the monitoring thereof formalised.
Composition of the Board
Principle 7:
Composition
    The Italtile Board comprises the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance roles and responsibilities objectively and effectively.    
  • The Board recognises that an appropriately balanced and diverse governance body is important for enhanced debate and decision making.
  • The Board believes that its current composition is appropriate for the current size and complexity of the Group, with the majority of the Board members being independent non-executive directors. The executives of the Group, including the Chief Executive Officer, are members of the Board, and members of the Group's Executive Committee and senior management attend Board meetings by invitation.
  • Given that the Chairman of the Board is not independent, a strong lead independent director has been appointed to the Board.
  • The Nominations Committee ensures that any Board candidates have the necessary skills, knowledge and experience to make a meaningful contribution to the Board, while ensuring that diversity and independence of the Board is preserved and all nominations are handled in a transparent manner.
  • Non-executive directors are subject to rotation and re-election after the Board satisfies itself that they remain fit and proper.
  • The Board completes an annual self-evaluation which is reviewed by the Chairman, with no areas of concern being noted during the most recent evaluation.
  • Declaration of interests is a standing agenda item for each Board meeting.
   
  • The Board is to develop and complete an annual attestation relating to the roles and responsibilities set out in the Board Charter.
  • The Board is to establish a formal induction policy.
  • Consideration will also be given to external Board evaluation processes.
Committees of the Board
Principle 8:
Committees
    The Italtile Board ensures that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties.    
  • The Board is supported by its four sub-committees (Audit and Risk Committee, Social and Ethics Committee, Nominations Committee and Remuneration Committee) whose chairpersons provide feedback at Board Meetings.
  • The responsibilities delegated to each sub-committee is formally documented in committee charters which are reviewed annually.
  • The Board ensures that the composition of the sub-committees is appropriate for delegated responsibilities and that there is effective collaboration through cross membership (while maintaining a balanced distribution of power).
  • Any member of the Board is entitled to attend any committee meeting as an observer, and members of management may also attend such meetings on invitation.
     
Evaluations of the performance of the Board
Principle 9:
Evaluations of performance
    The Italtile Board evaluates its own performance and that of its committees, its chair and its individual members, and supports continued improvement in its performance and effectiveness.    
  • The Board completes an annual self-evaluation which is reviewed by the Chairman, with no areas of concern being noted during the most recent evaluation.
  • The Board is satisfied that each sub-committees is functioning effectively.
    Consideration will be given to external Board evaluation processes.
Appointment and delegation to management
Principle 10:
Management appointment and delegation
    The Italtile Board ensures that the appointment of, and delegation to, management contributes to role clarity and effective exercise of authority and responsibility.    
  • Although the Board retains overall responsibility for the Group, it delegates the management of the day-to-day operations of the Group to the executive directors, who operate according to a delegation of authority framework.
  • The Group's Chief Executive Officer is held accountable for the performance of the Group and the implementation of the approved strategy. Progress against strategy and a summary of Group performance is reported by the Chief Executive Officer quarterly.
  • The executive directors are appointed by the Board, and their performance is measured against key performance indicators (financial and non-financial) by the Remuneration Committee.
  • The executive directors are not members of the sub-committees (barring the Social and Ethics Committee) but do attend committee meetings by invitation.
  • The Board believes the Company Secretary has the requisite knowledge, experience and stature.
  • The Board has formalised succession planning for executive directors.
   
  • The delegation of authority framework is to be revisited and updated by the Board, and the monitoring thereof formalised.

Governance functional areas

King IVTM principle     Affirmation statement     Application     Focus area
Risk governance
Principle 11:
Risk governance
    The Italtile Board governs risk in such a way that supports the organisation in setting and achieving its strategic objectives.    
  • The Board is ultimately responsible for ensuring that risks are effectively managed and has delegated this responsibility to the Audit and Risk Committee, with the understanding that the overarching aim of effective risk management being preservation of sustainable value creation for stakeholders.
  • An enterprise risk framework has been approved by the Audit and Risk Committee and is used to identify material risks (in accordance with a defined risk appetite) to which the Group's strategy and controls are to be responsive. A top-down and bottom-up approach is used to identify risks.
  • Risks identified using the enterprise risk framework are regularly reviewed and debated and a combined assurance model adopted in assessing the effectiveness of controls to address the risks. Providers of assurance include management, internal audit and external audit.
  • As part of the risk identification process, opportunities related to such risks are identified and leveraged where possible.
  • The Board has delegated the implementation and execution of effective risk management to the executive directors.
   
  • The enterprise risk frameworks for Ezee Tile and Ceramic Industries are to be aligned to that used by the Italtile Board.
Technology and information governance
Principle 12:
Technology and information governance
    The Italtile Board governs technology and information in a way that supports the organisation in setting and achieving its strategic objectives.    
  • The Board understands that information and technology ("IT") is a critical component of the business and is supported by the Audit and Risk Committee to oversee governance of technology and information.
  • The day-to-day management of the IT environment is delegated to management which includes a subject specialist Group IT Manager. Management report at least quarterly to the Board on matters relating to IT, including security and developments.
  • Risks related to technology and information are incorporated into the Group's enterprise risk framework with particular focus on controls to prevent unauthorised access to IT systems and information, and disaster recovery.
  • Incorporated in the Group's overall strategy, is a dedicated focus on the IT strategy to ensure alignment and critical support with the overall strategy.
  • Independent assurance relating to IT controls is obtained on an annual basis.
   
  • The Board, together with management will continue to improve the IT governance framework.
  • A Protection of Personal Information ("PoPI") compliance project is ongoing to assess areas of risk in order to mitigate them and ensure compliance with the PoPI Act.
Compliance governance
Principle 13:
Compliance governance
    The Italtile Board governs compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation in setting and achieving its strategic objectives.    
  • The Board is assisted by the Audit and Risk Committee and the Social and Ethics Committee to oversee compliance with applicable laws, regulations, codes and standards, including voluntary codes such as the UN Global Compact.
  • The Board has delegated the responsibility for implementing compliance to management, who consult with subject matter experts where deemed necessary.
  • Management participate in training sessions facilitated by subject matter experts where necessary.
  • An independent review of compliance with laws and regulations is performed every three years with the assistance of a credible legal firm, and findings thereof are reported to the Board and addressed by management. No material findings were noted during the previous review. In addition to this review, further limited assurance is obtained annually from the Group's external auditors and taxation consultants with regard to adherence to relevant laws and regulations.
  • The Group was not subject to any material penalties, sanctions or fines for contravention of, or non-compliance with, regulatory obligations during the period under review.
  • Refer to principle 3 disclosure above for further disclosure relating to the Company's governance of ethics and considerations for being a responsible corporate citizen.
   
  • The Board will further formalise and improve the compliance risk management framework.
Remuneration governance
Principle 14:
Remuneration governance
    The Italtile Board ensures that the organisation remunerates fairly, responsibly and transparently in order to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term.    
  • With the assistance of the Remuneration Committee, the Board ensures that executives, management and other staff are remunerated fairly and transparently, in order to support the Group's long-term sustainability and success.
  • The Group's remuneration policy is reviewed by the Remuneration Committee and approved by the Board. It is designed to attract and retain key personnel, promote the achievement of strategic objectives by establishing a high-performance culture, and preserve the corporate culture and ethics.
  • The Group's remuneration policy and implementation report is subject to non-binding votes by shareholders.
     
Assurance
Principle 15:
Assurance
    The Italtile Board ensures that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision making and external reporting purposes.    
  • The Board, assisted by the Audit and Risk Committee, ensures adequate assurance is obtained over the internal control environment, integrity of information for management decision making, and external reporting.
  • Italtile implements a combined assurance model comprising management, internal audit and external audit.
  • The Audit and Risk Committee reviews the internal and external audit approaches to ensure that significant risk areas and material matters are addressed.
  • The Internal Audit Charter and plan is approved by the Audit and Risk Committee, as it is responsible for overseeing this function.
  • The Head of Internal Audit has direct access to the Chairman of the Audit and Risk Committee and is not a member of executive management, thus preserving independence.
  • The Audit and Risk Committee receives regular reports related to assurance from the external auditor, Head of Internal Audit and management.
  • The Audit and Risk Committee recommends the appointment of the auditors. The Board is satisfied that the external auditor is independent.
   
  • The Board will further embed the principles of the combined assurance model across the Group.

Stakeholder relationships

King IVTM principle     Affirmation statement     Application     Focus area
Stakeholders
Principle 16:
Stakeholders
    In the execution of its governance roles and responsibilities, the Italtile Board has adopted a stakeholder inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interest of the organisation over time.    
  • The material stakeholders of Italtile are its shareholders, employees, franchisees, suppliers and business partners, government and regulators, communities and customers.
  • The management of stakeholder relationships and interactions is overseen by the Board with the assistance of the Social and Ethics Committee, both well aware of the importance of maintaining sound stakeholder relationships.
  • Italtile adopts an inclusive approach and engages stakeholders on multiple levels and through various mediums, allowing the Group to be effectively responsive to their needs, interests and expectations.
  • Management proactively encourages engagement with stakeholders.
  • The AGM is attended by all directors and the external auditor, providing shareholders with an opportunity to engage with them.
   
  • Consideration will be given to formalisation of a stakeholder engagement policy.
Responsible investment
Principle 17:
Institutional investors
    The Italtile Board does not apply this principle as the organisation is not an institutional investor.            

Governance structure

Governance structure

Board of directors

A formal Board Charter has been adopted and includes a code of ethics to which all directors subscribe. Procedures exist in terms of which unethical business practices can be brought to the attention of the Board by directors.

Composition of the Board

The Board comprises three executive directors, a non-executive Chairman, a non-executive Deputy Chairman and five non-executive directors all of which are independent.

The directors are individuals of a high calibre with diverse backgrounds and expertise, facilitating independent judgement and broad deliberations in the decision-making process.

Classification of directors

The basis on which directors have been classified in terms of their independence in this report, is as follows:

  • Executive directors are involved in the management of Italtile and/or its subsidiaries and are employed in a full-time capacity by Italtile.
  • Non-executive directors are those who have been nominated by a shareholder owning more than 20% of the Group, or who were in the employ of the Group in the preceding financial year. Non-executive directors are not involved in day-to-day management and are not in full-time salaried employment of Italtile and/or its subsidiaries.
  • Independent non-executive directors are all other directors irrespective of the period during which they have been members of the Board and as defined in King IVTM and JSE Listings Requirements.

No director has an automatic right to a position on the Board. All directors are required to be elected by the shareholders at an annual general meeting on a rotational basis.

Board responsibilities

The Board is responsible to shareholders for the conduct of the business of the Italtile Group, which includes providing Italtile with clear strategic direction. The schedule of matters reviewed by the Board includes:

  • Approval of the Group's strategy and annual budget;
  • Overseeing Group operational performance and management;
  • Ensuring that there is adequate succession planning at senior levels;
  • Overseeing director selection, orientation and evaluation;
  • Approval of major capital expenditure or disposals, material contracts, material acquisitions and developments;
  • Reviewing the terms of reference and approving charters of Board Committees;
  • Determining policies and processes which seek to ensure the integrity of the Group's risk management and internal controls;
  • Maintaining and monitoring the Group's systems of internal control and risk management;
  • Communication with shareholders, including approval of all circulars, prospectuses and major public announcements;
  • Approval of the interim statement and Integrated Annual Report and accounts (including the review of critical accounting policies and accounting judgements and an assessment of the Company's position and prospects); and
  • Approval of dividends.

The Board retains full and effective control over the business of Italtile. The Board has defined levels of materiality through a written delegation of authority, which sets out decisions the Board wishes to reserve for itself. The delegation is regularly reviewed and monitored.

Division of responsibility

The Company conducts an annual evaluation of its Board, Board Committees and individual directors, and is confident that there is an appropriate balance of power and authority on the Board to ensure that no one director has unfettered powers of decision making.

The division of responsibilities maintains a balance of power and authority on the Board.

Term of office

If requested to serve a further term, those retiring directors may offer themselves for re-election by shareholders. Any director appointed during the year must retire at the annual general meeting held immediately after his or her appointment.

The three executive directors have employment contracts without fixed terms. In accordance with the Company's Memorandum of Incorporation, all non-executive directors are subject to retirement by rotation and re-election by shareholders at least every three years.

Board meetings

The Board meets at least every quarter or more frequently if circumstances require. At the meetings, the Board considers both financial and non-financial qualitative information that might have an impact on the Group's stakeholders. Prior to every Board meeting, each director receives an information pack that provides background information on the performance of the Group for the year to date and any other matters for discussion at the meeting.

Board members have full and unrestricted access to relevant information, management, and the Company Secretary, and may, at the cost of the Group, seek independent professional advice in the fulfilment of their duties.

Details of attendance at Board meetings are set out below:

Board member   Attendance at meetings
G A M Ravazzotti   5/5
J N Potgieter#   5/5
S M du Toit   5/5
S I Gama1   3/3
S G Pretorius   5/5
N Medupe   5/5
B G Wood#   5/5
N V Mtetwa   4/5
T T A Mhlanga#2   1/1

# Executive.

1 Mr Gama resigned from the Board on 29 January 2018.

2 Ms Mhlanga was appointed to the Board on 11 May 2018. Prior to this, she attended three Board meetings by invitation.

Board appointment policy

The Board evaluates its composition each year to ensure an appropriate mix of skills, experience, professional and industry knowledge to meet the Company's strategic objectives. Demographic representation is also a consideration. New directors are subject to a 'fit and proper' test. An induction programme is available to incoming directors, providing guidance on their responsibilities. The appointment of the directors is approved at the annual general meeting of shareholders.

None of the non-executive directors have entered into service contracts or standard letters of appointment with Italtile.

Lead independent director

While the Board is led by a non-executive Chairman, Ms S M du Toit continues to serve as lead independent non-executive director to the Company's Board.

Board Committees

The Board has established four committees to which it has delegated specific responsibilities in meeting its corporate governance and fiduciary duties.

These committees operate within written terms of reference and charters approved by the Board. These are:

  • Audit and Risk Committee;
  • Remuneration Committee;
  • Nominations Committee; and
  • Social and Ethics Committee.

Audit and Risk Committee

The Committee met four times during the period under review. Attendance at the meetings were as follows:

Members   Attendance at meetings
S G Pretorius   4/4
S M du Toit   4/4
N Medupe   4/4
N V Mtetwa   2/4

For the full Audit and Risk Committee report refer to here.

Remuneration Committee

The Committee met twice during the period under review. Attendance at the meetings were as follows:

Members   Attendance at meetings
S M du Toit   2/2
G A M Ravazzotti   2/2
S G Pretorius   2/2

For the full Remuneration report refer to here.

Nominations Committee

The Nominations Committee is a sub-committee of the Board and meets on an ad hoc basis as required, but at least once a year. The Committee is chaired by the non-executive Chairman and comprises a majority of independent non-executive directors. The current members of the Committee are: Mr G A M Ravazzotti (Chairman), Mr S G Pretorius and Ms S M du Toit.

The Nominations Committee’s key roles include the identification and evaluation of suitable candidates for appointment to the Board, as well as succession planning.

The Nominations Committee considers both race and gender when nominating appointments of directors to the Board. The current Board composition is diverse in terms of both race and gender.

The Committee met three times during the period under review. Attendance at the meetings was as follows:

Members   Attendance at meetings
G A M Ravazzotti   3/3
S G Pretorius   3/3
S M du Toit   3/3

The Board considers the composition of the Nominations Committee to be appropriate for the needs of the Group at this time, and believes that the members are suitably equipped with the necessary knowledge, skills and experience.

Social and Ethics Committee

The Committee met twice during the year. Attendance at the meetings was as follows:

Members   Attendance at meetings
N Medupe   3/3
B G Wood   3/3
J N Potgieter   3/3

For the full Social and Ethics Committee report refer to here.

Company Secretary

The Company Secretary is Ms E J Willis and she is neither a director nor a shareholder of Italtile or any of its subsidiaries. On that basis, the Board believes that E J Willis maintains an arm’s length relationship with the executives, the Board and the individual directors.

The Company Secretary is responsible for administering the proceedings and affairs of the directorate, the Company and, where appropriate, owners of securities in the Company, in accordance with the relevant laws. The Company Secretary is available to assist all directors with advice on their responsibilities, their professional development and any other relevant assistance they may require.

The Nominations Committee has considered the skills and experience of the Company Secretary and the level of competence she has demonstrated as Italtile’s Group Company Secretary since 2009, and in her role as a company secretarial consultant since 2001. The Board, on the recommendation of the Nominations Committee, is satisfied with the level of competence of the Company Secretary. It requires a decision of the Board as a whole to remove the Company Secretary, should this become necessary.

Code of business and ethics

The Group has adopted a formal code of business ethics and conduct (“the Code”) which requires all directors and employees to act with honesty and integrity and to maintain the highest ethical standards. The Code deals with compliance with laws and regulations through a system of values and standards.

The Board oversees and ensures that management throughout the Group assumes responsibility for training and mentoring staff on the Group’s values and standards and ensuring compliance.

Stakeholder communication

Italtile is committed to open, honest and regular communication with key stakeholders on financial and non-financial matters. A working partnership between the Group, its suppliers, franchisees, employees and members of the community forms the basis of a mutually beneficial association.

The annual general meeting provides an opportunity to communicate directly with shareholders. The Chairman has the opportunity to present to the shareholders a report on current operations and developments. The meeting also provides a forum for shareholders to question and express their views about the Company’s business. The Chairmen of the Audit and Risk and Remuneration Committees are available at the meetings to answer questions from shareholders.

Notice of the annual general meeting and related documents are mailed to shareholders at least 15 business days before the meeting. Separate resolutions are proposed on each substantially different issue. The notice is contained in the Integrated Annual Report.

The Group’s executive management team meets with investors after the publication of interim and annual results to present an update on the industry, current operations of the business and its prospects.

Share dealings

All directors of the Company are required to comply with the requirements of the JSE regarding inside information, transactions and disclosure of transactions.

In line with the Financial Markets Act, No 19 of 2012, the Board enforces a restricted period for dealing in Italtile shares, in terms of which any dealings in shares by all directors and senior personnel is disallowed from the time that the reporting period has elapsed to the time that results are released and at any time that such individuals are aware of unpublished price-sensitive information, whether the Company is trading under cautionary announcement as a result of such information or not.

Risk management and internal controls

Italtile recognises that managing risk and compliance is an integral part of generating sustainable shareholder value and enhancing stakeholder interests.

The Group has in place an enterprise risk management framework which is based on a combined assurance model comprising: management (divisional and executive directors); external auditors (Ernst & Young Inc.); and Support Centre oversight (including the internal audit function). The structure of this model and its activities are designed to ensure that the Group’s risks are adequately addressed.

The Board, assisted by the Audit and Risk Committee, is responsible for risk, risk tolerance determination, risk management within the Group, performance of risk assessments, the use of acceptable risk methodologies and the monitoring of risk on a continual basis.

The Board ensures there is regular assessment of financial and non-financial risks in the context of the Group’s business environment, with a view to mitigating and/or eliminating risk through the Group’s strategies and processes.

Internal controls are designed to manage rather than eliminate risks of failure to achieve business objectives, and provide reasonable rather than absolute assurance against material misstatement or loss. The internal audit function is a structured review of internal controls based on risk assessment.

The key material risks, controls and strategic imperatives report discusses the Group’s top risks and issues and the management thereof in detail.

Sustainability

Italtile is committed to good corporate citizenship practices and organisational integrity in the direction, control and stewardship of the Group’s affairs.

The Group recognises the imperative to balance returns for shareholders with the long-term needs of the business, its employees, the broader society and the environment.

The Company is aware of its responsibility to safeguard the interests of all stakeholders and believes that good governance is essential to the Group’s long-term sustainability and functioning. The Group’s objective is to conform stringently to transparency, while operating profitably and remaining accountable to the broader community which it serves.

Shareholders, customers, employees, suppliers and business partners, franchisees, regulators and the communities in which the Group operates are regarded as key stakeholders.

King IV™ places emphasis on the principles of strategy, sustainability and governance and provides for greater integration of those elements. Accordingly, Italtile continues to strive to align the Group’s practices with the recommendations of King IV™.

Transformation

Italtile is committed to empowerment in its business and is supportive of transformation in the country. The Group endorses the principles in the Employment Equity Act and aligns its human resources policies accordingly.

Employment equity statistics

As at 30 June 2018

  Male   Female
  African Coloured Indian White   African Coloured Indian White Total
Skilled to top management 188 16 10 124   69 3 6 56 472
Semi-skilled and unskilled 1 221 53 5 103   336 24 9 55 1 806
Total 1 409 69 15 227   405 27 15 111 2 278

The above statistics apply to South African operations only and do not include the franchised stores. The Group submits its employment equity reports to the Department of Labour on an annual basis and has substantially met relevant targets in recent prior years.

Corporate social responsibility

The Group is committed to uplifting the societies in which it operates through following sound employment practices and meeting the real needs of those communities. Refer to here in this regard.

Occupational health and safety

Italtile complies with the Occupational Health and Safety Act, No 85 of 1993 and other relevant legislation, regulations and codes of practice for South Africa. The aim of the Group’s Health and Safety policy is to prevent and minimise work-related injuries and health impairments by ensuring that all employees are provided with adequate training and supervision to undertake their roles.

Environmental management

The Group’s Citizenship Manager is instrumental in implementing Italtile’s long-standing environmental consciousness values across the business. Programmes are aimed at measuring, managing and reducing the Group’s impact on the environment and promoting its long-term sustainability. This Citizenship Manager operates in conjunction with executive management, with a view to better aligning and integrating the Green agenda into the day-to-day processes and functioning of the business.

The Group’s Green agenda is discussed in greater detail here.

Human capital development

Italtile strives to be the employer of choice in its industry. The Group’s strategy is to recruit and retain the best people from South Africa’s diverse population base, and to ensure they are empowered, accountable for their actions and rewarded accordingly. Refer to here in this regard.

Skills development

Training and development initiatives are formulated and conducted in-house, ensuring relevance to the Group’s culture, values and strategy.

Training courses are designed for students ranging from beginners to intermediate and advanced levels. Training courses include an induction course for all new employees, as well as focused business, technical, management and corporate governance programmes. Minimum training competencies have been mapped for all job titles to support consistent standards across the Group.

Over the past year, training spend and operating costs amounted to R12,7 million (2017: R7,8 million).

In addition to Group-wide training interventions, Italtile’s Tiling, Plumbing and Laminate Academy continues to raise the benchmark in product knowledge training.

Economic impacts

Italtile is committed to satisfying the needs of its customers while delivering acceptable profit growth. The Group endeavours to create wealth for the benefit of all stakeholders.

The value added statement is a measurement of the wealth the Group created in its operations by adding value to the cost of raw materials, products and services purchased. The statement shows the total wealth created and how that was distributed.

The statement also takes into account the amounts retained and reinvested in the Group for the replacement of assets and development of future operations.