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 embraces the principles set out in King IV. King IV’s outcomes-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 IV is extracted from the IoDSA GAI, with the full assessment of all principles of King IV included here.
In accordance with the JSE Listings Requirements and King IV, the table below provides further detail on assessment of Italtile’s application of the governance principles as recommend by King IV. This table should be read in conjunction with additional corporate governance and other disclosures provided in this IAR. The Italtile Board supports the various principles of King IV and commits to continuous improvement in this regard.
|LEADERSHIP, ETHICS AND CORPORATE CITIZENSHIP|
|The Italtile Board leads ethically and effectively.||
|The Italtile Board governs the ethics of Italtile in a way that supports the establishment of an ethical culture.||
|Responsible corporate citizenship|
Responsible corporate citizenship
|The Italtile Board ensures that Italtile is, and is seen to be, a responsible corporate citizen.||
|STRATEGY, PERFORMANCE AND REPORTING|
|Strategy and performance|
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 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.||
|GOVERNING STRUCTURES AND DELEGATION|
|Primary role and responsibilities of the Board|
Primary role and
|The Italtile Board serves as the focal point and custodian of the organisation’s corporate governance.||
|Composition of the Board|
|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.||
|Committees of the Board|
|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.||
|Evaluations of the performance of the Board|
|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.||
|Appointment and delegation to management|
|The Italtile Board ensures that the appointment of, and delegation to, management contributes to role clarity and effective exercise of authority and responsibility.||
|GOVERNANCE FUNCTIONAL AREAS|
|The Italtile Board governs risk in such a way that supports the organisation in setting and achieving its strategic objectives.||
|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 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 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.||
|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.||
|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 Italtile Board does not apply this principle as the organisation is not an institutional investor.|
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 two executive directors, a non-executive Chairman and seven non-executive directors, five of whom 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; and
- 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 IV and the 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 AGM on a rotational basis.
The Board is responsible to shareholders for the conduct of the business of the 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 financial statements and IAR (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
The two executive directors have employment contracts without fixed terms. In accordance with the Company’s memorandum of incorporation (“MOI”), all non-executive directors are subject to retirement by rotation and re-election by shareholders at least every three years.
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 AGM held immediately after his or her appointment.
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||4/4|
|L R Langenhoven||4/4|
|L A Foxcroft||4/4|
|B G Wood||4/4|
|S G Pretorius||4/4|
|S M du Toit||4/4|
|N P Khoza||4/4|
|L C Prezens||4/4|
|J N Potgieter||4/4|
BOARD APPOINTMENT POLICY
The Board evaluates its composition each year to ensure an appropriate mix of skills, experience, and 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 AGM 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 of the Company’s Board.
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 five times during the period under review. Attendance at the meetings was as follows:
|Members||Attendance at meetings|
|L R Langenhoven*||5/5|
|L A Foxcroft*||5/5|
|B G Wood*||5/5|
|S G Pretorius||5/5|
|S M du Toit||5/5|
|N P Khoza||5/5|
|L C Prezens||5/5|
Refer to the full Audit and Risk Committee report.
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 M du Toit||3/3|
|S G Pretorius||3/3|
|L A Foxcroft*||3/3|
|B G Wood*||3/3|
|L R Langenhoven*||3/3|
|#||A Mathole was appointed to the Committee on 1 January 2023.|
Refer to the full Remuneration Committee report.
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 gender, race, culture, age, field of knowledge, skills and experience when nominating appointments of directors to the Board. The current Board composition is diverse in terms of both race and gender.
The Committee met once during the period under review. Attendance at the meetings was as follows:
|Members||Attendance at meetings|
|G A M Ravazzotti||1/1|
|L R Langenhoven*||1/1|
|S G Pretorius||1/1|
|S M du Toit||1/1|
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 three times during the year. Attendance at the meetings was as follows:
|Members||Attendance at meetings|
|L A Foxcroft*||3/3|
|B G Wood*||3/3|
|S G Pretorius^||2/2|
|N P Khoza||3/3|
|^||Stepped down from the Committee on 1 January 2023.|
|#||Joined the Committee on 1 January 2023.|
Refer to the full Social and Ethics Committee report.
The Board considers the Committee’s composition appropriate in terms of the necessary skills and experience of the members.
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 Ms 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 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.
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 AGM provides an opportunity to communicate directly with shareholders. The meeting 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 AGM (“Notice”) 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 IAR.
The Group’s executive management team meets with investors after the publication of interim and annual results.
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 auditor (PricewaterhouseCoopers 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 nonfinancial 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 Strategic management of material risks report discusses the Group’s top risks and the management thereof in detail.
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.
The Group philosophy is that a well-structured, efficiently implemented ESG strategy makes a significant contribution to the strength of the corporate brand and positions the business to create and unlock sustainable value for all stakeholders.
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.
Refer to Chief Executive Officer's letter to stakeholders, Social and Ethics Committee report, Our stakeholders, The environment we operate in, Strategic management of material risks, Human resources and training, Transformation, Environmental report, Italtile and Ceramic Foundation Trust report and Corporate social investment report for further disclosures relating to sustainability.
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 HR policies accordingly. Refer to Transformation report for the detailed report.
EMPLOYMENT EQUITY STATISTICS
As at 30 June 2023
|Skilled to top management||247||21||20||94||117||12||12||57||580|
|Semi-skilled and unskilled||1 289||42||10||37||465||24||5||25||1 897|
|Total||1 536||63||30||131||582||36||17||82||2 477|
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 communities in which it operates through following sound employment practices and meeting the real needs of those communities. Refer to the Corporate social investment report 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 and other territories in which it operates. The aim of the Group’s Health and Safety policies are 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.
The Group’s Citizenship Manager oversees the implementation of 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 aligning and integrating the green agenda into the day-to-day processes and functioning of the business.
Refer to the Environmental report in this regard.
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 the diverse communities in which it operates, and to ensure they are empowered, accountable for their actions and rewarded accordingly. Refer to Human resources and training report in this regard.
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. Training competencies have been mapped for all job titles to support consistent standards across the Group.
Over the past year, training and bursary spend on employees of the Group and franchisees amounted to R55 million (2022: R40 million).
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.