This past year has been the most difficult one ever in the history of the Group.

On 8 February 2011 our company aeroplane, carrying the CEO of Italtile, Gianpaolo Ravazzotti
and eight of our colleagues and business partners, crashed, claiming the lives of all on board.

That devastating event has changed forever the lives of everyone linked to the tragedy. No words can express our loss.

As a responsible public listed company we are committed to safeguard the sustainability of our business; it is our duty to ensure the Group preserves the interests of all our stakeholders. As Executive Chairman, I am ably supported in this role by my experienced management team and guided by my Board of Directors. Over 40 years we have managed this business with a long-term vision, and will continue to do so.

Overview

We have in recent years reported according to the “triple bottom line”, separating out financial, social and environmental performance. In line with the requirements of King III we accept that these issues are fully integrated in our business and therefore need to be reported accordingly. This is Italtile’s first integrated annual report, in which we combine the Group’s financial statements with sustainability reporting and disclosure. We acknowledge that there is further progress to be made in improving this report, but believe it provides a balanced representation of the Group’s performance and is evidence of our commitment to the process.

Trading environment

Our markets in South Africa, Africa and Australia continued to reflect the effects of the global financial crisis which took hold in 2007 – 8. The slow rate of economic recovery is particularly evident in the building and construction sector, with both government and consumer sentiment cautious, and with spend constrained. This is demonstrated by the lack of new build activity in public and private sector projects. Inevitably in a recessionary cycle, the renovation segment performs better, as evidenced over the past three years. Under these conditions, the Group’s high-profile brands and long-standing reputation as the style and value leader were critical to retaining its leadership position.

In this country and internationally, industry competitors resorted to aggressive price cutting, many of them simply to secure their survival. Further rationalisation of participants was experienced in the local market.

The strength of the local currency resulted in a surfeit of low value imported product which created further volatility in the market. In this context, the Group’s 30 year record as an import procurement specialist was vital in ensuring that customers received a consistent supply of reputable, high quality, well priced products.

Results

Despite the absence of any significant recovery in the economy and the intensely competitive trading environment, the Group gained market share in most of the markets it serves. This is rewarding recognition, from existing and new customers, that our ongoing efforts to improve our offering is appreciated.

Growth was achieved across each of the retail brands, Italtile, CTM and TopT, with the Group reporting like-on-like system-wide turnover of R3,02 billion (2010: R2,75 billion) an improvement of 10%. Operating profit increased 15% to R448 million (2010: R389 million). In the current competitive environment price inflation was restricted. Cash reserves improved 18% to R839 million (2010: R711 million), reflecting the robust health of the business. Projected net cash inflows are in excess of operating requirements and planned capital expenditure.

Dividend

The Board has declared a final dividend of 6 cents per share (2010: 5 cents per share) for the year which together with the interim dividend of 6 cents per share (2010: 6 cents per share) amounts to a total dividend of 12 cents per share (2010: 11 cents per share), an increase of 9%.

The dividend cover will remain at three times.