Chairperson's statement

Looking ahead, we expect market conditions to remain challenging, requiring continued focus, agility and resolve across all areas of the organisation.

As I complete my second year as Chairperson, I am proud of the adaptability and shared purpose that continue to define our organisation. This year has brought both challenges and opportunities and, through it all, our people have remained the driving force behind our progress. It has been a year that reminded us of the importance of listening, learning and leading with empathy. I would also like to extend my sincere thanks to Giovanni Ravazzotti, my father, for his continued guidance and leadership at all levels of the organisation – his enduring support remains a source of strength and wisdom. Together, we have sharpened our strategic focus and laid stronger foundations for sustainable growth – anchored in a vision that reflects who we are and where we are headed.

Results

The Group performance was impacted by the subdued global and local macro-economic environment, intense competition, deflationary pricing and weak demand. Revenue was lower than the previous financial year while trading profit remained stable, offset by increased sales and improved market share in Italtile Retail and Ezee Tile. The manufacturing division was negatively impacted by the excess capacity in the industry and the decline in average selling prices. The business responded to the challenging trading conditions by reducing costs, unlocking efficiencies, launching new ranges, improving synergies across the vertically integrated supply chain and investing in skills training and development.

Italtile Group’s total turnover decreased by 2% to R11,3 billion and trading profit at R2,1 billion was similar to the prior financial year. Cash generation continued to be strong resulting in cash reserves of R2,2 billion. Headline earnings per share and earnings per share rose 2% and 3% respectively and the total dividend, including the special dividend, increased significantly by 17% to 148,0 cents per share.

In the year ahead, we will continue to prioritise the aspects of the business we can control, such as improving our competitiveness, containing costs, optimising operations, emphasising leadership and growth of our people, differentiating our offering from competitors and maintaining market share.

Board focus

The Board’s deliberations during the year focused on the following key issues:

• Investment decisions – balancing the need to keep abreast of industry developments and remaining competitive against containing capital expenditure when faced with weak demand. The Board previously approved the trial project using a coal-fired Hot Air Generator, but agreed with management to delay the project until 2026. The Board considers all opportunities to increase shareholder value and makes decisions on the best use of the Group’s resources.
• Capex and project approvals including, among others, the Hot Air Generator (“HAG”) project, based on projected returns and delivery of substantial benefits, at a cost of R11 million; and an offtake agreement with Botala Energy in Botswana to supply coal bed methane gas for Betta from mid-2028.
• Strategic considerations such as the continued oversupply of capacity and product in the market that has resulted in intensified competition, aggressive price wars and margin pressure; finding solutions to the stock build-up across the business; the importance of operational efficiency and strong leadership to drive improvements; the imperative to improve efficiencies and focus on the aspects that differentiate the business, while ensuring that the Company has the talent and skills to remain competitive in the face of aggressive competition; opportunities for further cost reductions; the opportunity to improve customer satisfaction and employee engagement through embedding a culture of exceptional customer service, reinforcing the importance of knowledgeable, engaged and customer-centric staff; and the focus on collaboration and planning across operations, suppliers, webstore and internal departments to ensure complete alignment and a seamless experience for customers; ways to simplify the corporate structure, including the merger of wholly owned trading and property companies in foreign jurisdictions, and the merger of Cedar Point into Italtile Ceramics.
• Oversight of the new incentive awards and the vesting of allocations; and of the achievement by the Group of a Level 2 B-BBEE rating.
• Various reviews, including the strategic review in February 2025; review of executive KPIs and contracts with the priority to finalise clawback provisions; the legal compliance review during which no material findings were noted; and the assessment of the internal control environment which remains robust.
• Support for gaining government’s support in levelling the playing fields in our industry.

Environment, social and governance (“ESG”)

The Group is committed to achieving the United Nations’ Sustainable Development Goals to realise a better and more sustainable future for all. The Company has designed an inclusive ESG strategy, focusing on our commitment to addressing ESG matters in all aspects of our business.

Environment

As a responsible business, we acknowledge our duty to safeguard the planet for future generations. Our environmental sustainability framework includes metrics, targets and reporting. A range of initiatives were implemented to reduce the Group’s environmental impact. Please refer to Environmental report in this report.

Social

Our socio-economic development (SED) projects are aligned with the Group’s purpose and mission, Company strategy and material issues, and are a combination of structured strategic and ad hoc projects that arise from community needs in the areas in which we conduct our business.

Transformation

As a responsible and enthusiastic corporate citizen, we sell local products manufactured by local people, thereby supporting job creation. Our spend on socio-economic development this year was over 1% of net profit after tax. The CSI report on Corporate social investment report and the Foundation report on Italtile and Ceramic Foundation Trust report detail our support for a variety of programmes and initiatives to support local communities.

Our Proudly South African policies and practices focus on promoting the sustainability of our business, the communities in which we operate and the broader economy. By selling local products manufactured by local people, we support job creation and facilitate skills transfer.

Governance

In preparing this IAR, we referred to the JSE’s Sustainability and Climate Disclosure Guidance documents as a benchmark for the business’s reporting standards. The Board is satisfied that disclosures regarding governance, strategy, management, metrics, targets and performance, as recommended by the guidelines, have largely been adopted in this report.

Board composition and succession planning

Building leadership depth and a strong succession pipeline have always been key strategic priorities in our business. Throughout this IAR, there are references to our investments in human capital to ensure that we have the best possible operating structure and the most competent teams.

As you will read in the CEO’s report, each of the business units has focused on skills and development training so as to differentiate the Group from its competitors based on customer service, advice, flair and after-sales service. Our exceptional management team comprising our CEO, Lance Foxcroft, COO, Brandon Wood and CFO Lamar Booysen lead by example and inspire their teams to aspire to higher standards on a daily basis.

Ms Nkateko Khoza resigned as an independent non-executive director, Chairperson of the Social and Ethics Committee and member of the Audit and Risk Committee, with effect from 11 June 2025. We are grateful for her excellent contribution to the Board and thank Ms Khoza for her years of service. We wish her success as she focuses on growing Dzana Investments and its associated interests.

Ms Alex Motshwanetsi Mathole, currently an independent non-executive director of the Board and member of the Social and Ethics Committee, has been appointed as Chairperson of this Committee from 13 June 2025. Mr Brand Pretorius, currently an independent non-executive director of the Board, has been appointed as a member of the Committee, from 13 June 2025. The Committee now comprises Ms Alex Motshwanetsi Mathole (Chairperson), Mr Lance Foxcroft and Mr Brand Pretorius.

Ms Mamedupi Matsipa was appointed to the Board on 22 August 2025. She is a strategic investment professional with over 20 years’ experience in private equity, investment banking and information systems and brings expertise in driving value through governance and execution excellence. As a trusted adviser and non-executive director on boards spanning the energy, telecoms, healthcare, industrial and insurance sectors, Ms Matsipa will be a valued addition to our Board and is warmly welcomed.

Staff share scheme

Our equity-settled staff share scheme is designed to incentivise employees and franchisees, who have been employed by the Group for three uninterrupted years, to participate in the growth and profitability of the business. Most of our employees elect to receive the payout rather than shares, as the amounts can be life-changing – and even more so in the current difficult environment.

As part of the scheme, 2,5 million of the Group’s shares were held by qualifying staff members at 30 June 2025 (2024: 3,2 million). The first allotment of shares in the scheme, granted in 2023, vested on 31 March 2025. A total of 253 employees qualified for the vesting, 250 of whom elected to have the shares disposed of on their behalf to receive the net value of the awards in cash with the balance electing to retain the shares.

Dividend and dividend policy

The Group’s dividend cover remains at two-and-a-half times. The Board is satisfied that this level affords rewarding returns for shareholders, while remaining prudent in a challenging trading environment, allowing for capital investment if and when valueadding opportunities arise.

The Board has declared a final gross ordinary cash dividend of 22,0 cents per ordinary share. This, together with the interim gross ordinary cash dividend of 28,0 cents per share, produces a total gross ordinary cash dividend declared for the year of 50,0 cents per share. Given the Group’s strong cash generation and cash reserves being in excess of operational requirements, the Board has declared a special cash dividend of 98,0 cents per share (2024: 78,0 cents per share).

Capital allocation

Net cash reserves increased by 18% to R2,2 billion this year. As we expect cash generation to remain strong in the year ahead, our capital allocation strategy will continue to be based on a blended programme comprising capital expenditure and returns to shareholders. Forecast capex for the year ahead is at R300 million, including the coal syngas trial programme at Gryphon. Having concluded our major expansionary projects and in the light of current excess production capacity in the market, capex is lower than prior years and mostly confined to maintenance rather than expansion. We will continue to assess and implement a range of options for allocation of cash reserves, share buy-backs and special dividends.

Outlook

Strong competition in the industry is set to continue for the foreseeable future, although further consolidation is likely. While economic forecasts are not encouraging, we believe that within our business there are prospects for growth. Our dedicated teams, differentiated offering, competitive advantages and the benefits of our vertical integration, added to a focus on internal efficiencies will position us to capitalise on opportunities as they arise.

Appreciation

Firstly, may I thank our institutional and private shareholders for their long-standing commitment to and support of Italtile through the volatile environment. Their constructive engagements are insightful and valued.

Secondly, my appreciation goes to our business partners and advisers who continue to contribute to the success of this business.

I value all the people in our business who are committed to our goal of being Africa’s best retailer of tiles, sanitaryware and complementary products. Our store operators and franchisees have shown resilience and determination despite the challenging operating environment.

I would like to pay tribute to our executive management team for their expertise, dedication, drive and hard work; and to my fellow Board members for their diverse knowledge, counsel and strategic insights. Together we continue to ensure the long-term sustainability of the business.

Finally, to Mr R, our former Chairman and founder, I express my gratitude for his continued guidance, support and wisdom. His legacy to Italtile continues to inspire, encourage and motivate me personally and all our employees who respect and work with him.