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Consumer confidence levels have been low, underpinned by worsening sentiment in the residential sector due to the reduction in activity. In this challenging environment, we have focused on remaining competitive and managing the aspects of our business which we can control.

The analysis below for the year ended 30 June 2025 focuses on the key elements of the Group's financial performance and statement of financial position, which management believes to be important for the understanding of the Group's performance. The review should be read together with the annual financial statements. All comparisons are against the 2024 financial year unless stated otherwise.

Financial results

Group financial results summary

	2025		% change from 2024	2024
Group and franchise results
Turnover (Rm)
– by Group-owned stores and entities	8 876		(2)	9 064
– by franchise-owned stores	2 383		(4)	2 471
System-wide turnover (Rm)	11 259		(2)	11 535
Number of stores*	210		1	208
Group results
Turnover (Rm)	8 876		(2)	9 064
Trading profit (Rm)	2 061		0	2 056
Total assets (Rm)	10 552		(1)	10 634
Cash and cash equivalents (Rm)	2 169		18	1 844
Number of shares in issue ('000)	1 321 654		–	1 321 654
Headline earnings per share (cents)	125,1		2	123,0
Ordinary dividends declared per share (cents)	50,0		2	49,0
Special dividends declared per share (cents)	98,0		26	78,0
Net asset value per share (cents)	705,0		(0)	707,5
Number of employees	2 646		4	2 554

Turnover

System-wide turnover for the financial year decreased by 2% versus the prior year with key factors being difficult macro-economic conditions for businesses and consumers, increased competition (retail and manufacturing) and internal inefficiencies.

Consolidated turnover of R8 876 million was 2% lower than the prior year (2024: R9 064 million) - a decline from the flat turnover recorded at half year.

Retail

Gross retail store turnover increased by 0,4% versus the prior year, while on a like-for-like basis increased by 1,3%. Overall average selling prices rose by 0,2% in the retail businesses with increases in volumes being noted for all merchandise categories except for décor, sanitaryware and wooden flooring, which decreased by 1,3%, 3,1% and 14,9% respectively.

Sales from Company-owned stores increased 2,3% for the year to date while franchise stores sales decreased 3,6%. A contributing factor was the conversion of the TopT Mopani region's stores to Company-owned stores at the beginning of the financial year. Excluding this impact, and other changes in the store mix, sales from Company-owned stores grew 0,7% while those of franchise stores' decreased 0,7%.

Supply chain – import businesses

Sales by the Supply Chain businesses, (Cedar Point, ITD and DC), were 2,9% lower, collectively. During the prior year, price increases were passed on due to exchange rate fluctuations, higher shipping costs (which decreased from the end of the previous calendar year) and increased pricing from suppliers. These increases were delayed as long as possible to support competitive pricing at the retail level and were staggered, having a mixed impact on margins from a timing perspective. The decline in the average selling price was also impacted by changes in the sales basket mix, e.g., the move to lower-priced products as customers shopped down.

Supply chain – manufacturing

Manufacturing sales (aggregation of Ceramic Industries, Ezee Tile and PiViCal Panels) decreased by 5,1% to R4,7 billion, as volumes remained under pressure at Ceramics, which faced increased competition in the market as tiles from factories in Southern Africa continued to penetrate the local and export markets.

Due to improved production and deliveries from the Ezee Tile plants, coupled with the impact of price increases, Ezee Tile grew sales by 4,0%.

Gross margin

On a consolidated level, the gross margin achieved for the year remained flat at 40,6%.

The Manufacturing businesses collectively recorded a gross margin percentage decrease of 1,4% from the prior year-end, which had a significant impact on the overall Group gross margin. The biggest contributing factors that have impacted the gross margin are low factory yields and production volumes. Tile volumes in particular have come under pressure due to the competitive factors detailed above.

The Supply Chain businesses' gross margin percentages increased collectively by 0,2%. These businesses benefitted from a stronger Rand and lower shipping costs, which decreased from the end of the previous calendar year. This was offset by a change in sales mix with customers shopping down in retail stores and a higher purchase price introduced by suppliers.

The Manufacturing and Supply Chain businesses continued to limit and delay price increases, in some cases offering price reductions on tiles to retailers, to support competitive retail prices, resulting in retail margins decreasing by 0,7% on the prior year-end.

At a Group level, inventory provision income statement releases of R13 million compared to R20 million further contributed to the reduced achieved gross margin percentages detailed above. In addition, changes in the store mix (movements in sales volumes between Company-owned and franchised stores) resulted in mix changes in the intercompany sales elimination on consolidation, which may increase/decrease the margin depending on the nature of store sales mix change.

Other operating income

Other operating income comprises various income received from franchised stores (rental, royalties, and IT and other service fees). The income was flat as an increase in franchise agreement renewal income was offset by a decrease in clawback income year-on-year.

Operating expenses

Operating expenses dropped by 2,8% on the prior year (the decrease is similar on a like-for-like basis). Notable movements for the prior year were recorded on the following expense items:

• manpower costs (including share-based payments and profit share) included in operating expenses increased by 0,8%, mainly as a result of annual salary increases, net of decreases in profit share offsetting the increase. On a like-for-like basis, manpower costs included in operating expenses increased by 0,6%. The focus on productivity assisted with maintaining costs, although some opportunity to improve still exists;
• manpower costs including profit share related to the Manufacturing businesses (included in the cost of sales line) decreased 8,3%; excluding profit share and share-based payment expenses, a decrease of 6,7% was recorded. This was attributable to a reduction in headcount and profit share at Ceramics net of a deliberate investment in the leadership pipeline (including filling vacancies);
• JV profit share decreased 20,4% year-on-year, due to a change in the JV store mix;
• net distribution costs of Ceramics and Ezee Tile (included in operating expenses) decreased by 6,2%, resulting from lower fuel prices and a decrease in Ceramic's sales volumes. Similarly, net distribution costs in the retail and supply chain businesses decreased by 4,1%. Total net distribution costs for the Group were 5,9% lower;
• property costs included in operating expenses (excluding IFRS 16) rose by 3,8% on a like-for-like basis;
• depreciation and impairments (excluding IFRS 16) included in operating expenses increased by 1,4% as certain assets were moved out of WIP with depreciation commencing. Depreciation included in cost of sales (Manufacturing businesses) increased by 5,0% as a result of capital expenditure in the prior year. Return on recent capital spend has thus not been adequate. The total depreciation charge (including IFRS 16) across all businesses increased by 4,3%;
• information technology costs were 3,1% higher with a strategic decision made to move in-store scanners from a capex to an operating expense model, with savings realised on a net basis coupled with various cost savings;
• total donations (by the Foundation Trust and Group companies) decreased by 18,6%;
• stock control costs dropped substantially by 19,2% in retail stores and distribution businesses. Count variance costs decreased by 5,9%, largely due to count variances on the closure of U-Light of R5,8 million in the prior year. Stock count controls need improvement in the retail stores particularly following a concerning increase in incidents of theft by employees. Sample and display costs decreased by 4,4% to R15 million; and
• travel and related expenses reduced by 19,5% predominantly due to a decrease in local and overseas travel coupled with lower fuel prices.

Trading profit

Trading profit was flat primarily due to decreases in gross profit net of savings in operating costs as detailed above.

Finance income

Finance income increased by 4%, which is largely attributable to an increase in the average cash holdings for the year coupled with a R2 million fair value gain on the Italtile and Ceramic Foundation's investments, which are held at fair value through profit and loss.

Finance costs

Finance costs decreased due to the early settlement of the R500 million Nedbank loan coupled with the new drawdown facilities being only partially drawn for most of the third and fourth quarters.

Taxation

The taxation expense decreased by 3% from the prior year. The lower effective tax rate is attributable to the increase in non-taxable dividend income resulting from higher average cash balances throughout the year.

Non-controlling interest

Earnings from non-controlling interests increased as a result of the rise in profits of businesses with minority partners.

Earnings per share

Earnings per share ("EPS") and headline earnings per share ("HEPS") increased to 125,6 cents and 125,1 cents respectively. The slight disparity between EPS and HEPS is attributable to after-tax profits of R7 million earned on assets sold.

A 1% decrease in the weighted number of shares from 1 198 million to 1 190 million (as a result of own share purchases during the previous year) resulted in the slightly higher increase in EPS compared to the decrease in attributable profits after tax.

Property, plant and equipment

Capital expenditure of R234 million was incurred on property, plant and equipment, with significant capital spend being as follows:

• miscellaneous Ezee Tile: R37 million;
• Vitro rectification line and associated capex: R45 million;
• Pegasus press 2 rebuild: R10 million;
• Australia rectification project: R32 million;
• other Ceramic's factory upgrades and capex: R33 million;
• retail buildings (extensions and renovations): R29 million; and
• retail store revamps: R35 million.

Inventory

The Group's inventory balance net of provisions and including goods on the water decreased to R1 228 million from R1 271 million at 30 June 2024 (a decrease of 3%). On a gross basis, prior to provisions and including the goods in transit balance (R36 million at 30 June 2025 versus R33 million at 30 June 2024), total inventory holdings of R1 408 million reduced by 4,1% (2024: R1 469 million).

This decrease is predominantly attributable to a reduction in the excessive investment in stock at Cedar Point and lower stock at Ceramics.

Total inventory provisions decreased from the prior financial year end to R122 million (2024 year end: R144 million), mainly due to a lower value of finished goods at Ceramics.

The 12-month average financial stock turn has shown improvement in some businesses as a result of decreased average inventory holdings. However, this was partially offset by lower stock turn at Ceramics, resulting in an increase in Group stock turn of 3,6% to 6,5 times from 6,7 times.

Cash and cash equivalents

The Group's cash balance rose to R2 169 million from R1 844 million, with cash generated by operations offset by the following outflows during the year:

• capital expenditure of R234 million;
• dividend payments of R1 619 million; and
• income tax payments of R462 million.

Trade and other receivables

The 5% decrease in net trade and other receivables is attributable to a decrease in prepayments, which was increased further by timing differences on receipt of payments from debtors. Overall, there has been no noticeable deterioration in the average collection period on trade receivable balances.

The doubtful debt provision decreased to R65 million (2024: R69 million) as the provision was utilised to write off historic debts considered irrecoverable (for which provisions had been raised historically).

During the preparation of the Group's 2025 annual financial statements, and in the process of providing enhanced disclosure through further disaggregation of the credit risk note for trade receivables, the Group identified a matter relating to intercompany consolidation entries dating back to preceding financial years. This resulted in an understatement of both trade and other receivables and trade and other payables amounting to R190,5 million in each of the preceding years. The matter has been rectified in the current year's financial statements.

Trade and other payables

The 2% decrease in net trade and other payables is attributable to timing differences on payments and stock purchases.

Provisions

The 2% increase in the provision balance is attributable to an increase in the rehabilitation provision of R12 million raised for the rehabilitation of the Silica Quartz sand mine acquired by the Group, net of a decrease of R8 million in the profit share provision.

Events after reporting date

Other than the dividend declaration, the directors are not aware of any matters or circumstances arising since the end of the reporting period that will significantly affect the financial position at 30 June 2025 or the results of its operations or cash flow.

Internal control environment

The general control environment remains robust and I have no knowledge of any fraud or suspected fraud, which could have a material effect on the results of the Group.

Outlook

We foresee a similar challenging economic and trading environment in the financial year ahead - including a highly competitive landscape, excess capacity and low demand as consumers continue to experience constrained circumstances. Our focus will remain on improving efficiencies across all aspects of the business, providing exceptional product ranges and an unrivalled customer shopping experience, as we defend our market leadership position.

Appreciation

I would like to extend my sincere appreciation to:

• our shareholders for the constructive engagements and support;
• our customers for their continued loyalty to our business and brands;
• our management and staff for their determination and commitment to delivering a world-class shopping experience and manufacturing process;
• our finance teams for producing sound financial information and reports;
• our CEO, Lance Foxcroft, for his leadership and guidance;
• our COO, Brandon Wood, for his mentorship and support;
• our non-executive directors for their sound counsel;
• Mr Ravazzotti for his inspirational leadership and unrelenting pursuit of excellence; and
• our Chairperson, Luciana Ravazzotti Langenhoven, who shares our vision and commitment to continual development of our exceptional Company.

Lamar Booysen
Chief Financial Officer