Italtile Limited is a franchisor and retailer of local and imported tiles, sanitaryware, bathware, laminated and vinyl flooring and other related home-finishing products. The Group's retail brands are CTM, Italtile Retail and TopT, represented through a total network of 162 stores, 18 of which are located in the rest of Africa. The brand offering targets homeowners across the LSM 4 to 10 categories.

The retail operation is strategically supported by a vertically integrated Supply Chain, investments in key suppliers, and an extensive property portfolio.

The Group's dream is to become the best retailer in the world of tiles, sanitaryware and ancillary products, by offering an unrivalled shopping experience for customers. This ambition is underpinned by the retail excellence strategy, "right product, at the right time, place and price".


Trading conditions and consumer sentiment continued to deteriorate over the year as a result of poor economic growth and socio-political uncertainty.

In this adverse environment, homeowners curtailed or deferred discretionary spend on residential improvements and renovations, while the new-build segment declined further, reflected by a marked decrease in building plans passed.

In general, large segments of the market remained overstocked due to the downturn in consumer demand and the high level of imported product in the country culminating from opportunistic traders capitalising on currency strength. With the industry-wide fall in sales, price competition and margin pressure intensified.

In this context, the Group's robust business model served it well. The strategic retail brand portfolio ranging across the income continuum, integrated supply chain, strong partnerships with entrepreneurial franchisees, property portfolio and long-standing solid reputation, together with sustained investment in revitalising the offering continued to appeal to traditional customers as well as new, emerging homeowners.


Historically, traditionally house-proud South Africans have invested relatively freely in upgrading or replacing their homes. However, with intensified pressure on disposable incomes, homeowners increasingly view property spend as a luxury indulgence and are significantly more discerning in their purchases, which are now less frequent than in prior years, and more selective in their choice of retailers.

During the year, a range of trends emerged in the industry which illustrates this:

  • While price and service remained key sales drivers, consumers are also gravitating to "convenience" offerings – convenient both in terms of accessibility of brick and mortar stores as well as innovative online and digital technology offerings aimed at expediting and enhancing the ease of the shopping experience. The Group's continued investment in its national store network and digital and in-store technology are designed to cater to this trend.
  • Rapidly evolving technology and its omnipresence in most areas of modern lifestyles had a significant influence on driving quicker changes in fashion trends and a growing demand for instant gratification from consumers seeking latest fashion products with limited lead times. Associate, Ceramic Industries' state-of-the-art inkjet printing technology has been a game changer for the business, enabling its factories to respond timeously to up to the minute design trends.
  • The widespread availability of technology to consumers and their unlimited access to online research information has served to educate them and influence their expectations of the in-store experience. This development has necessitated that retailers improve their offering to meet customers' increasingly demanding aspirations. Up-weighting the "delight" and "disruptive" factors in the shopping experience has become a major strategy for the Group's brands.


At the end of the first six months of this period, management cautioned that due to the subdued economic climate and constrained consumer demand, results in the second six months would be weaker than the first six (being typical of the Group's cyclical long-term retail sales trend), but also weaker than the comparable second six months of 2016.

Disappointingly, this forecast proved to be accurate, with sales and profitability failing to meet management's targets. Key factors contributing to the inadequate performance include the slow-down in discretionary spending (detailed above); the volatility of the currency; the Group's overstock position, which while substantially improved over the past six months, remains a key focus area; and the general country-specific risks which continue to cause both private and public sectors to suspend investment in property.

System-wide turnover for the period increased by 4% to R6,21 billion (2016: R5,96 billion). System-wide turnover is defined as the aggregate of the Group's consolidated turnover as reported (total sales by Group-owned entities and corporate stores, excluding sales from owned supply chain businesses to corporate stores) and the turnover of franchisees of the Group.

Like-on-like retail store turnover for the period increased by 2,7%. Retail store turnover is defined as the aggregate of turnover of all stores, either corporate or franchised, in the Group's network.

Trading profit increased 2% to R1 063 million (2016: R1 047 million). While turnover for the period includes the partial or full contribution of the 10 corporate TopT stores opened during the period, profitability was offset by high pre-opening expenses. Average price inflation of 4,3% was lower than the prior comparative period (2016: 6,5%).

Retail margins were marginally lower despite both de-stocking activities and the retail brands continuing to offer competitive value to price-conscious customers. This was achieved through improved containment of costs in the second half of the period (specifically in distribution, manpower costs and stock control); prudent marketing activities; improved use of trading intelligence and an enhanced mix of higher margin products in the average basket.

The Group's basic earnings per share rose by 3% to 90,3 cents (2016: 87,8 cents), while headline earnings per share decreased 1% to 85,7 cents (2016: 86,9 cents).

Basic earnings include the impact of a R37 million once-off gain realised on the sale in December 2016 of the Group's Australian property holding company, which is excluded from headline earnings.

Good progress was achieved in terms of the Group's stated goals for the second half of the period, namely to reduce operating costs and to improve its working capital position. In this regard cash and cash equivalent reserves at the end of the period grew to R511 million (2016: R347 million), representing an increase of 47%. Inventory levels reduced to R548 million (2016: R693 million), a decline of 21%, while simultaneously reflecting enhanced quality. Stock management is a core discipline across the business and improved stock turn and reduced stock losses are closely monitored key performance indicators.

During the period capital expenditure of R334 million (2016: R375 million) was incurred, primarily on property acquisitions and upgrades in the property investment portfolio to underpin the Group's growth programme.

Total dividends of R305 million (2016: R279 million) were paid in the period.

The Group's net asset value was 403 cents (2016: 362 cents).



The following activities were prioritised during the period, aimed at driving further growth in the business and improving returns for stakeholders:

  • Instil the principles of retail excellence as a standard operating procedure;
  • Continue to expand the Group's store network;
  • Leverage opportunities in the Supply Chain;
  • Continue to invest in information technology ("IT") and e-commerce;
  • Gain market share from imported product through new Gryphon products; and
  • Improve inventory management and working capital.

Good progress was recorded in several areas, including the expansion of the store network with the addition of 14 TopT and two CTM stores; implementation of the Group's Business Optimisation Programme ("BOP") across the business, resulting in improved efficiencies; and continued investment in IT to upgrade the brands' webstores and websites as well as enhance technology in-store to improve the customer shopping experience. In addition, Gryphon's ranges were entrenched as market leaders in the import substitute category. Pleasing results were also achieved in terms of improving working capital and inventory management during the second half of the period, as discussed further in the results section.

While all of these initiatives contributed to enhancing the business, numerous additional opportunities exist to leverage further growth and efficiencies. Management acknowledges that substantial progress needs to continue to be made to attain the Group's ambitious growth targets.

Retail brands
Despite the competitive landscape, CTM maintained its share of market, while Italtile Retail and TopT continued to grow their respective customer bases in both existing and new markets.

All three brands grew their sales and total value of the average basket, however Italtile Retail and CTM recorded lower profitability, while TopT improved profits. Each of the brands experienced a degree of margin pressure, reporting a slight decline in margins.

The strongest performing regions across the brand portfolio were Limpopo and the Western Cape (the latter a function of increased property investment resulting from homeowners semi-grating from other regions), while Gauteng, the region which historically delivers the Group's highest value in sales, reported flat results.

While CTM's results underperformed management's targets, under new operational leadership the business made progress on improving basic disciplines. Enhanced efficiencies were achieved in warehouse management, and the brand's performance rating programmes, Voice of the Customer and Mystery Shopper, recorded better levels of customer service and sentiment in the stores. Management recognises that further substantial improvements need to be made across the business to bring it in line with the Group's expectations.

Italtile Retail's premium-end market niche continued to contract as wary consumers postponed their investment decisions in the current climate. Furthermore, the Commercial Projects division which had reported an upturn in recent months experienced another setback, as a number of projects were put on hold following the sovereign credit downgrade by investment rating agencies. During the period the brand upgraded its bespoke sales consultant training programmes, aimed at raising service benchmarks even higher, and is well positioned for growth when trading conditions improve.

In the period under review, TopT achieved national brand status with the expansion of its store footprint to all nine provinces. The good local geographical distribution of sites was complemented with the opening of a store in Botswana in July 2017. TopT's solid results for the period illustrate the optimal use of BOP across the store network, with a strong correlation between availability of business critical stock and higher sales.

Supply Chain
The Group's strategically integrated Supply Chain comprises International Tap Distributors ("ITD"), Cedar Point and Distribution Centre.

During the review period, ITD reported a decrease in sales and stock turn primarily due to the overstock position of many of the Group's stores; despite this, however, profits and margins improved due to better cost control. ITD's founder (and former Managing Director) retired at the end of the financial year, selling his 14% shareholding in the business to the Group, which now owns 98% of the company. A new, well-qualified and experienced management team has subsequently been appointed, and in keeping with Italtile's ethos of profit sharing and empowerment, the Group intends selling a 10% minority stake to a suitable partner from this new team during the second half of the new financial year.

Cedar Point recorded higher sales, but profits, margins and stock turn declined, primarily due to a substandard range/price matrix and historically poor inventory management. Re-engineering of the operation is a key priority in the period ahead and will include range rationalisation, a change in warehouse management systems, restructuring of the staff complement and reconfiguration of logistics solutions to the stores. Remedial action to improve investment in stockholding will include exploring opportunities to supply the open market.

In the Distribution Centre business, sales, profits and margins deteriorated as a function of the general downturn in demand from the Group's stores.


Ceramic Industries
The Group holds a 21% strategic stake in manufacturer Ceramic, its primary supplier of tiles, sanitaryware and bathware. This tactical investment is key to advancing Italtile's growth agenda. The business comprises five tile factories, a sanitaryware factory and a bath factory in South Africa, and one tile factory in Australia.

Ceramic's results in the first half of the period were substantially stronger than the second half. Locally, in the latter six months the business experienced a fall in sales in light of the general economic slow-down and overstocked position of most of its customers, exacerbated by the high level of imported product in the market. The weaker sales resulted in poor capacity utilisation in the factories, causing a decline in profits and margins during the second half of the period. In the Australian operation, sales decreased slightly in subdued trading conditions, while the deliberate strategy to gain market share through keen pricing resulted in a nominal decline in margins.

Ceramic's after tax profits for the period declined from the prior period as a result of an increase in its effective tax rate, having benefited from tax incentives related to the Gryphon factory in the prior period. Accordingly, Ceramic's contribution to Group profit for the period decreased 2% to R81 million (2016: R83 million).

Despite prevailing difficult trading conditions, Ceramic remains optimistic about growth opportunities in South Africa and Australia and will continue to invest in upgrading its factories and facilities to ensure it is optimally positioned to capitalise on any increase in market demand.

Ezee Tile
The Group holds an effective 46% stake in Ezee Tile, a national manufacturer of grout, adhesive and related products. In the context of subdued consumer demand across the industry, Ezee Tile's sales, profits, margins and stock turn for the period, although improved, were less buoyant than the previous period. The business contributed R13,5 million (2016: R12 million) to Group profit, an increase of 13%.


Further to the SENS announcements published on 26 April 2016, 9 June 2016 and 20 July 2016, Italtile submitted a binding offer ("Binding Offer") on 16 July 2016 to Ceramic, to acquire up to a further 73,5% of the company's issued share capital ("the Acquisition"). In terms of the Acquisition, the purchase consideration equates to R3,61 billion which will be settled in cash (50%) and the balance by the issue of Italtile shares at R11,57 per share.

The Acquisition remains subject to attainment of certain conditions precedent and approval from the competition authorities. Shareholders are referred to the SENS announcements published on 20 and 28 July 2016, 11 August 2016, 14 and 21 September 2016, 10 February 2017, 17 March 2017, and 1 August 2017, as well as the Acquisition circular dated 23 August 2016, for further detail in this regard.

Following the Competition Commission's ("the Commission's") prohibition of the Acquisition, the Group filed a Request for Consideration with the Competition Tribunal ("the Tribunal") and subsequently an in limine hearing was held with the Tribunal on 25 and 26 October 2016 to consider certain circumscribed aspects of the proposed merger.

On 10 February 2017 the Group advised in its reviewed condensed results announcement for the six months ended 31 December 2016 that a full hearing with the Tribunal was scheduled to take place between 6 and 15 March 2017.

Shareholders were subsequently advised that, following a request from the Commission, proceedings scheduled for 6 to 15 March 2017 would be delayed to enable the Commission additional time to prepare for the hearing, including verifying key industry information which the Commission indicated may be dispositive to its concerns regarding the proposed Acquisition.

Accordingly, new Tribunal hearing dates were scheduled for 10 to 14 July 2017, with presentation of final arguments scheduled for 31 July 2017.

These dates were beyond the previously agreed extension date of 30 June 2017 stipulated in the Binding Offer and Implementation Agreement. Approval was therefore requested and obtained from the boards of Italtile and Ceramic to:

  • further extend the date for fulfilment of the Conditions contained in paragraphs 9.4(a), 9.4(f), 9.4(h) and 9.4(m) of the Binding Offer to 30 September 2017; and
  • further extend the date for fulfilment of the Conditions contained in clauses 5.1(c)(v), 5.1(c) (vii) and 5.1(c)(xii) of the Implementation Agreement to 30 September 2017.

The hearings scheduled for 10 and 14 July have subsequently been concluded, although presentation of final arguments is now scheduled to take place on 18 August 2017. It is anticipated that the entire process will conclude within the next two months.

Italtile remains optimistic of a favourable outcome in terms of obtaining the required approvals from the competition authorities to proceed with the Acquisition.

Shareholders will be apprised of the details of the ruling as soon as practicable thereafter.


The Group's property portfolio affords strategic advantage to the retail brand operations by ensuring stores are easily accessible, well-presented and maintained, and contribute to an aspirational shopping experience. The portfolio is continuously evaluated and enhanced to ensure optimal returns.

As at 30 June 2017, the portfolio had an estimated market value of R2,6 billion (2016: R2,4 billion). In the period under review, R232 million (2016: R284 million) was invested in an ongoing store upgrade programme and the acquisition of eight properties. During the period, 14 new TopT and two new CTM stores were opened.

In line with management's stated intent, the Group concluded the sale of its Australian property holding company in December 2016, realising a gain of R37 million.


The Group's equity-settled Staff Share Scheme is designed to incentivise employees to participate in the growth and profitability of the business. In this regard, management has previously proudly reported that the first allotment of shares in this scheme, granted in 2013, vested on 31 August 2016. A total of 334 employees qualified for the vesting, of which 42 employees opted to receive shares and the balance (292 employees) received the net value of the awards in cash. Cash payments after tax averaged R204 000 per individual and totalled R59,7 million, funded by the sale of the related shares to the market. Employees who elected to receive shares, received between 12 083 and 15 802 Italtile Limited shares each (dependent on the individual's effective income tax rate).

During the reporting period a further allotment of 2,8 million shares (2016: 3,1 million shares) was allocated to 155 eligible employees of the Group and franchisees (2016: 161 employees).


As announced on SENS during the course of the year, the following changes were made to the Board of directors of the Company:

  • Ms Alessia Zannoni resigned as a non-executive director on 25 November 2016;
  • Mr Nick Booth, formerly Chief Executive Officer, announced his decision to take early retirement with effect from 28 February 2017. He stepped down from executive duties on 1 December 2016, and was succeeded by Mr Jan Potgieter, formerly the Group's Chief Operating Officer; and
  • Ms Gugu Mtetwa was appointed as a non-executive director with effect from 28 January 2017.


All indications are that current socio-political and economic conditions will prevail for at least the next six months.

Real disposable income is likely to decline further in the context of poor economic growth, limited job creation and significant increases in personal income taxes for middle and high-income earners. Country-specific risk will also remain a factor for the forth-coming period and management anticipates a weakening trend of the local currency.

Sustained high levels of stock in the market and lower-consumer demand will drive intensified competition as operators vie for a share of wallet. Further rationalisation of marginal industry participants is also probable.

Despite this contextual outlook, the Group remains confident that its strong brands as well as robust and resilient business model can capitalise on growth opportunities in this market, particularly given the relatively low per capita consumption of tiles in this country compared to peer economies.

Furthermore, management is satisfied that its competent leadership team, clearly defined strategies and clarity of purpose positions the business well for continued growth. The Group's competitive advantage will continue to be furthered by its tactical brand portfolio, integrated supply chain, strong entrepreneurial partnerships and long-standing reputation.

While advancement of the store roll-out programme will be determined by market demand and availability of suitable sites and operators, the Group's goal is to open a total of 20 new stores over the next financial year, including at least one Italtile Retail store and three CTM stores. Furthermore, capacity in the Supply Chain will also continue to be developed to support anticipated growth over the long term.

In addition to expanding the capacity of the business, opportunities for growth also exist within the business itself, through improved competencies, efficiencies, and conceptualisation of retail innovations and market-disruptive strategies.

Management's key focus areas in the forthcoming period will include:

  • further improvement of the working capital position through intensified control of inventory and all overhead costs;
  • better productivity through enhanced performance management and training initiatives;
  • attracting, retaining and developing an appropriately skilled personnel complement, capable of enabling the Group's growth strategy;
  • continued development of sector leading technology; and
  • driving the strategy to offer a customer-centric shopping experience which constantly delights our customers.


No events have occurred subsequent to the reporting period that require any additional disclosures or adjustments.


The Group has maintained its dividend cover of three times. The Board has declared a final gross cash dividend of 14,0 cents per share (2016: 15,0 cents per share), which together with the interim gross cash dividend of 16,0 cents per share (2016: 14,0 cents per share), produces a total gross cash dividend declared for the year ended 30 June 2017 of 30,0 cents per share (2016: 29,0 cents per share), an increase of 3%.


The Board has declared a final gross cash dividend (number 102) for the year ended 30 June 2017 of 14,0 cents per ordinary share to all shareholders recorded in the books of Italtile as at the record date of Friday, 8 September 2017.

In accordance with paragraphs 11.17(a)(i) to (x) and 11.17(c) of the Listings Requirements of the JSE Limited ("JSE Listings Requirements"), the following additional information is provided:

  • The dividend has been declared out of income reserves.
  • The local dividend withholding tax rate is 20% (twenty percent).
  • The gross local dividend amount is 14,00 cents per share for shareholders exempt from the dividends tax.
  • The net local dividend amount is 11,20 cents per share for shareholders liable to pay the dividends tax.
  • The local dividend withholding tax amount is 2,80 cents per share for shareholders liable to pay the dividends tax.
  • Italtile's income tax reference number is 9050182717.
  • The Group has 1 033 332 822 shares in issue including 9 866 130 shares held by the Italtile Share Incentive Trust and 83 120 423 shares held as BEE treasury shares.


The cash dividend timetable is structured as follows: the last day to trade cum dividend in order to participate in the dividend will be Tuesday, 5 September 2017. The shares will commence trading ex-dividend from the commencement of business on Wednesday, 6 September 2017 and the record date will be Friday, 8 September 2017. The dividend will be paid on Monday, 11 September 2017. Share certificates may not be rematerialised or dematerialised between Wednesday, 6 September 2017 and Friday, 8 September 2017, both days inclusive.

The full reviewed Group results announcement has been released on SENS and is available for viewing on the Company's website (; furthermore, it is available for inspection at the registered offices of Italtile and the sponsor, Merchantec Capital, during business hours. Copies of the full announcement are available at no cost on request and may be obtained from the Company Secretary who is contactable on: +27 11 882 8200 or:

For and on behalf of the Board

J Potgieter
Chief Executive Officer
B Wood
Chief Financial Officer

No forward looking statements in this announcement have been reviewed or reported on by the Group's auditors.

The condensed Group results announcement for the year ended 30 June 2017 has been reviewed by Ernst & Young Inc. ("EY"). EY's unmodified review conclusion does not necessarily report on all of the information contained in this condensed Group results announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors' engagement, they should obtain a copy of EY's unmodified review opinion together with the accompanying financial information from the Company Secretary at the Company's registered office.


16 August 2017

investor contacts

Physical address

The Italtile Building
Cnr William Nicol Drive and
Peter Place


Postal address

P O Box 1689
Randburg 2125


Contact details

Telephone: +27 11 510 9050
Fax: +27 11 510 9060