| APPLICATION
OF GOVERNANCE CODES |
| The directors of Italtile
fully endorse the spirit of transparency, integrity
and accountability as advocated in the King Committee
report on corporate governance. |
| |
| BOARD OF DIRECTORS |
In terms of the Group’s
long term succession plan, effective 1 July 2006,
Mr Giovanni Ravazzotti, resumed his former role
as Group Executive Chairman and Mr Gian-Paolo
Ravazzotti assumed the position of Chief Executive
Officer of the Group. Accordingly, Mr Derek Rabin
relinquished his role as Chairman and resumed
his previous role as a non executive director
of the Group.
Mr Christian Trumpelmann elected to take up a
franchising opportunity within the Group and therefore
resigned as Chief Operating Officer and as an
executive director with effect 1 April 2006.
Mr Gordon Cousins advised the Board that he would
be spending a significant amount of time in pursuit
of new off- shore business interests and therefore
decided not to stand for re-election at the annual
general meeting and resigned with effect 2 December
2005.
Italtile Limited and its subsidiaries have unitary
board structure, comprising three executive directors
and three non-executive directors, one of which
is independent. The Board meets regularly and
maintains full and effective control in directing
the Group towards achieving its vision.
In terms of its charter, the Board is ultimately
accountable for the formulation and execution
of strategies to meet the Group’s objectives,
operational performance, financial results of
the Group’s risk management, financial controls
and director selection and evaluation.
The Board works to a formal agenda covering areas
of operational performance, strategy and growth
initiatives. Board papers are circulated prior
to every meeting. A clear division of responsibilities
exists which maintains a balance of power and
authority.
The Board has also delegated certain specific
responsibilities to Board subcommittees, which
are detailed more fully below.
The Board as a whole is responsible for the selection
and appointment of non-executive directors in
accordance with the criteria set out in the Board
charter. Selection will be voted on, after the
Board collectively or individually has conducted
a formal interview with the candidate.
Membership of the Italtile Board is set out on
page 24. The directors bring together a wealth
of experience and expertise from varying fields
to ensure the Group retains proper direction and
control over its business activities.
One third of the Board retires by rotation each
year. If requested to serve a further term by
the Board, those retiring directors can offer
themselves for re-election by the shareholders.
In addition any director appointed during the
year must retire at the annual general meeting
held immediately after his appointment. |
| |
| OPERATION OF
THE BOARD OF DIRECTORS |
| The Board meets each
quarter and on an ad-hoc basis should the need
arise. Details of the attendance at Board meetings
are set out in the table below: |
| |
| Board meetings |
| |
5
August 2005 |
9
September 2005 |
29
October 2005 |
28
January 2006 |
6
May 2006 |
| G
A M Ravazzotti |
 |
|
|
|
|
| P
D Swatton |
|
|
|
|
|
| G
P E Ravazzotti |
— |
|
|
|
|
| J
Couzis |
|
|
|
|
|
| S
I Gama |
|
|
|
|
|
| D
H Rabin |
|
|
|
|
|
| C
Trumpelmann |
— |
|
|
|
n/a |
| G
F Cousins |
|
— |
— |
n/a |
n/a |
|
|
= Present
|
| — |
= Not present
|
|
| |
| Directors have unrestricted
access to the Company secretary, executive management
and, at the expense of the Company, outside counsel
in the execution of the duties and responsibilities. |
| |
| REMUNERATION
OF DIRECTORS |
Details of individual
director’s remuneration are found on page
29. The remuneration committee ensures the provision
of executive remuneration packages and director’s
fees that are competitive in relation to that
of other South African retail companies.
No service contract exists between the Company
and any of its directors. |
| |
| BOARD COMMITTEES |
| Audit
committee |
| The membership of the
Group’s audit committee is set out on page
24. The committee operates within written terms
of reference confirmed by the Board, which include: |
 |
Compliance with
applicable legislation. |
|
Matters relating
to the maintenance of adequate books and
records, internal controls, accounting policies
and
financial reporting and disclosure. |
|
Approval of the
scope of the external audit, review of audit
reports and fees. |
|
Compliance with
the code of corporate governance. |
|
| |
The external auditors
have unrestricted access to the audit committee.
The audit committee has adopted guidelines as
to the extent of fees paid for non-audit services
provided by the external auditors, so that these
fees do not become so significant as to call into
question the external auditor’s independence
of Italtile. The audit committee met four times
during the year. |
| |
| Attendance at
these meeting was: |
| |
Ordinary
meetings |
| |
5
August 2005 |
14
September 2005 |
27
January 2006 |
5
May 2006 |
| J
Couzis |
|
|
|
|
| S
I Gama |
|
|
|
|
| P
D Swatton* |
|
|
|
|
|
|
= Present
|
| * |
= By invitation |
|
| |
| The audit committee,
which provides regular reports on its activities
to the Board, confirms that it has adhered to
its terms of reference over the past financial
year. |
| |
| REMUNERATION
COMMITTEE |
| The remuneration committee’s
membership is set out on page 24. The committee
operates within written terms of reference confirmed
by the board, which include: |
| |
|
Group’s
remuneration policy. |
|
Short-term and
long-term incentives policies for directors,
executive management and staff. |
|
| |
| The remuneration committee
met once during the year. Attendance at this meeting
was: |
| |
3
September 2005 |
| D
H Rabin |
|
| G
A M Ravazzotti |
|
|
| |
| CODE OF ETHICS |
Italtile has documented
a formal code of ethics. The Group, through a
system of values and standards, is committed to
the promotion of ethical behaviour and the compliance
with laws and regulations towards being a good
corporate citizen.
The Board plays an oversight role in ensuring
that management throughout the organisation assumes
responsibility for training, mentoring staff on
the Group’s values and standards and, where
appropriate, ensuring compliance. |
| |
| RISK MANAGEMENT
AND INTERNAL CONTROL |
The Board is responsible
for risk management. It regularly assesses the
financial and non-financial risks in the context
of the Group’s business environment with
a view to their mitigation or elimination through
the Group’s strategies and processes.
The Group’s most significant areas of risk
are: |
|
Currency
risk |
| |
The foreign currency
exposures on imported product is actively
managed. All foreign liabilities are matched
with forward exchange contracts, upon confirmation
of import orders. |
| |
|
|
Computer-based
business processes |
| |
All Italtile’s
major business processes are computer-based.
Italtile has a formally documented and tested
disaster recovery plan. |
| |
|
|
Credit
risk |
| |
Trade credit is
available through the Italtile division.
Strict credit granting criteria are in place
and the trade debtor’s book is insured
through a reputable insurance company. |
|
| |
Italtile operates within
an established framework of values designed to
create an environment where decentralised autonomy
is coupled with accountability for operational
and financial objectives matched with centralised
leadership.
The Board believes that an adequate system of
internal control is in place, which mitigates
identified areas of significant risk, to an acceptable
level. |
| |
| STAKEHOLDER
COMMUNICATION |
Italtile is committed
to the principle of transparency in its dealings
with key stakeholders. 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 report deals adequately with disclosures
pertaining to financial statements, auditor’s
responsibility, accountability, accounting records,
internal control, risk management, accounting
policies, adherence to accounting standards, going-
concern issues and adherence to codes of conduct. |
| |
| CORPORATE SOCIAL
RESPONSIBILITY |
| Italtile is keenly aware
of its responsibility to the broader society in
which it operates. A sustainable business is only
built upon foundation of partnership that enriches
society as a whole. |
| |
| OCCUPATIONAL
HEALTH AND SAFETY |
| Occupational health
and safety remains a priority with compliance
reviewed on a quarterly basis by an independent
third party. No serious accidents were reported
throughout the Group during the year. |
| |
| ENVIRONMENTAL
MANAGEMENT |
The nature of our business
is such that it has little negative impact on
its environment. We generate no effluent or noise
pollution.
In the construction of its stores, Italtile takes
great care in harmonising each building with its
surroundings in order to provide staff, customer
and community a pleasing, safe and clean environment.
As far as possible we provide facilities to prevent
vehicle congestion in the neighbourhoods in which
we are situated. |
| |
| HUMAN CAPITAL
DEVELOPMENT |
As indicated by the
Group’s financial results, Italtile has
continued its trend of rapid financial growth.
This in itself presents challenges to the organisational
leadership and places great demands on staff.
As a consequence, the following have been identified
as the Group’s key strategic themes: |
| |
|
To match the demographics
of the organisation with the diverse markets
in which we trade, a representative task
team drives the Group’s employment
equity plan, and ensures stated milestones
are being met. |
|
Worker participation
– Italtile employs a number of participating
mechanisms within the organisation, whereby
relevant financial information is shared
and participation in operational decision-making
is encouraged. The Group has implemented
a profit incentive scheme in which all members
of staff share in trading profits generated. |
|
To develop the
level of entrepreneurship within the Group,
it is a stated objective to have all trading
operations either in an outright franchise
or in a partnership within Italtile. |
|
To continuously
enhance the delivery and effectiveness of
training in order to improve the foundation
of skills within the organisation. |
|
| |
| SOCIAL RESPONSIBILITY |
Italtile continues to
invest, across all nine provinces in South Africa
and neighbouring countries, in education, training
and skills transfer through the Italtile training
academy which has provided tiling, technical and
business skills to many previously unemployed
individuals.
Italtile has made significant donations to children’s
aids hospices and environmental organisations. |
