The style. The passion. - Italtile Limited · 2019-05-21 · – by Group-owned stores and entities...

I ntegrated annual repor t 2012

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The style. The passion.

Business review (4 – 41)

4 Group at a glance

8 Financial highlights

9 Material issues

14 Chairman’s statement

20 Operational review

38 Group review

Governance (42 – 55)

42 Corporate governance

55 Directorate and administration

Financial statements (56 – 100)

56 Directors’ approval

57 Audit and Risk Committee report

59 Independent auditors’ report to

the shareholders of Italtile Limited

60 Directors’ report

66 Statements of comprehensive income

67 Statements of financial position

68 Statements of changes in equity

69 Statements of cash flows

70 Notes to the financial statements

100 Subsidiaries

Additional information (101 – 116)

101 Analysis of shareholders

102 Shareholders’ spread

103 Branch addresses

108 Administration and offices

109 Shareholders’ diary

110 Notice to shareholders

114 Annexure to notice of

annual general meeting

115 Form of proxy

116 Notes to the form of proxy

www.italtile.com

Contents

Italtile Limited integrated annual report 2012

Earnings per share

41,1 centsTrading profit

R523 millionSystem-wide turnover#

R3,51 billion

09 121110080706

4 0

94

5 1

47

3 3

16

2 1

092 5

16

5 1

47

3 3

91

Market capitalisation (R million)*

*Excluding treasury shares#Unaudited

09 121110080706

44

8

52

3

38

9

36

1

42

4

39

3

33

8

Trading profit (R million)

1

2 Italtile Limited integrated annual report 2012

With 43 years of experience in the

industry, Italtile recognises that its

greatest challenge is to keep innovating

and striving to ensure its offering is

aspirational, accessible and affordable.

3Italtile Limited integrated annual report 2012


Region Company Nature of business Contribution to Group trading profit

South Africa • International Tap Distributors (Pty) Limited• Cladding Finance (Pty) Limited• Majuba Aviation (Pty) Limited• Cedar Point Trading 326 (Pty) Limited

• Distributor of taps and accessories• Outsourced debtors solutions• Aircraft charter company• Distributor of tiling tools, laminated boards, cabinets

and accessories

Italy • Ser Export s.p.a. • Procurement specialist

South Africa • Italtile Ceramics Limited• Italtile Retail (Pty) Limited• TopT Ceramics (Pty) Limited• Ceramic Tile Projects (Pty) Limited

• Retailers of tiles, laminate boards, taps, sanitaryware and accessories• Retailers of tiles, taps, sanitaryware and accessories• Retailers of tiles, laminate boards, taps, sanitaryware, hardware and

accessories• Suppliers of tiles, taps, sanitaryware and accessories to

contracts market

Australia • Italtile Australia (Pty) Limited • Retailers of tiles, taps, sanitaryware and accessories

Africa • CTM Kenya Limited• Orban Investments 375 (Pty) Limited

• Retailers of tiles, taps, sanitaryware and accessories• Retailers of tiles, laminate boards, taps, sanitaryware and accessories

South Africa • Italtile Franchising (Pty) Limited • Bearer of South African trademarks

Mauritius • Italtile Mauritius Limited • Bearer of non-South African trademarks

South Africa • F.B. Ashman (Pty) Limited (Italtile Property Holdings)• Allmuss Properties (Pty) Limited (CTM Property Holdings)• Emerald Sky Trading 736 (Pty) Limited

(TopT Property Holdings)• Magnolia Ridge Properties 291 (Pty) Limited• Penates Logistics (Pty) Limited

• Property investments• Property investments• Property investments• Property investments• Property investments

Australia • Norstorm Pty Limited• Melkbos Pty Limited

• Property investments• Property investments

Africa • Allmuss Botswana (Pty) Limited• Allmuss Properties Namibia (Pty) Limited• Allmuss Lesotho (Pty) Limited• Allmuss Properties Kenya Limited• Allmuss Properties (Uganda) Limited• Allmuss Properties Zambia Limited

• Property investments• Property investments• Property investments• Property investments• Property investments• Property investments

Retail

Supply and support services

Franchising

Property investment

Group at a glance


Region Company Nature of business Contribution to Group trading profit

South Africa • International Tap Distributors (Pty) Limited• Cladding Finance (Pty) Limited• Majuba Aviation (Pty) Limited• Cedar Point Trading 326 (Pty) Limited

• Distributor of taps and accessories• Outsourced debtors solutions• Aircraft charter company• Distributor of tiling tools, laminated boards, cabinets

and accessories

Italy • Ser Export s.p.a. • Procurement specialist

South Africa • Italtile Ceramics Limited• Italtile Retail (Pty) Limited• TopT Ceramics (Pty) Limited• Ceramic Tile Projects (Pty) Limited

• Retailers of tiles, laminate boards, taps, sanitaryware and accessories• Retailers of tiles, taps, sanitaryware and accessories• Retailers of tiles, laminate boards, taps, sanitaryware, hardware and

accessories• Suppliers of tiles, taps, sanitaryware and accessories to

contracts market

Australia • Italtile Australia (Pty) Limited • Retailers of tiles, taps, sanitaryware and accessories

Africa • CTM Kenya Limited• Orban Investments 375 (Pty) Limited

• Retailers of tiles, taps, sanitaryware and accessories• Retailers of tiles, laminate boards, taps, sanitaryware and accessories

South Africa • Italtile Franchising (Pty) Limited • Bearer of South African trademarks

Mauritius • Italtile Mauritius Limited • Bearer of non-South African trademarks

South Africa • F.B. Ashman (Pty) Limited (Italtile Property Holdings)• Allmuss Properties (Pty) Limited (CTM Property Holdings)• Emerald Sky Trading 736 (Pty) Limited

(TopT Property Holdings)• Magnolia Ridge Properties 291 (Pty) Limited• Penates Logistics (Pty) Limited

• Property investments• Property investments• Property investments• Property investments• Property investments

Australia • Norstorm Pty Limited• Melkbos Pty Limited

• Property investments• Property investments

Africa • Allmuss Botswana (Pty) Limited• Allmuss Properties Namibia (Pty) Limited• Allmuss Lesotho (Pty) Limited• Allmuss Properties Kenya Limited• Allmuss Properties (Uganda) Limited• Allmuss Properties Zambia Limited

• Property investments• Property investments• Property investments• Property investments• Property investments• Property investments

2011

35%

2011

2011

2011

17%

20%

28%

2012

2012

2012

2012

33%

17%

22%

28%

2011

35%

2011

2011

2011

17%

20%

28%

2012

2012

2012

2012

33%

17%

22%

28%

2011

35%

2011

2011

2011

17%

20%

28%

2012

2012

2012

2012

33%

17%

22%

28%

2011

35%

2011

2011

2011

17%

20%

28%

2012

2012

2012

2012

33%

17%

22%

28%

The Group’s improved results are derived

predominantly from organic growth in the

business. Both the retail operations and

the supply chain reported increased

revenue and profitability and a gain in

market share.



Financial highlights

% change

from 2011 2012 2011

Group and franchise results

Turnover (Rm’s)

– by Group-owned stores and entities 21 1 845 1 521

– by franchised-owned stores (unaudited) 12 1 673 1 500

System-wide turnover (Rm’s) 16 3 518 3 021

Number of stores 4 112 108

Group results

Turnover (Rm’s) 21 1 845 1 521

Trading profit (Rm’s) 17 523 448

Total assets (Rm’s) 14 2 623 2 296

Cash and cash equivalents (Rm’s) 9 917 839

Number of shares in issue (000’s) — 1 033 332 1 033 332

Headline earnings per share (cents) 18 41,0 34,6

Ordinary dividends declared per share (cents) 17 14,0 12,0

Net asset value per share (cents) 17 218 186

Number of employees 12 683 609


Material issues

Enterprise and economicStakeholders: shareholders, franchisees, employees, customers, suppliers and business partners

Strategic focus 2012 2013 focus and targets

Enterprise Risk Management c The Group has in place an Enterprise Risk Management framework which is based on a combined assurance model comprising three key components: management (divisional and executive directors); external auditors (Ernst & Young Inc.); and head office oversight (including the internal audit function). This structure serves to: specify the sources of assurance over the Group’s risks; link risk management and assurance activities, which facilitates review of risk management effectiveness; and provides a basis for identifying assurance gaps. These activities are designed to ensure that the Group’s risks are adequately addressed.

c Management: regular regional and divisional meetings are held and flat reporting structures facilitate transparent communication and oversight. The Group will continue to ensure intensive involvement by the executive directors in frequent visits to stores and supply chain partners; regular communication with and motivation of staff; and fostering a culture of partnerships, all aimed at promoting safeguarding of assets and policy compliance.

c External audit: addresses perceived audit risk related to presented financial information, internal controls and audit differences. The Group has received unmodified audit reports throughout its relationship with Ernst & Young Inc. – reflecting the strong control environment within the Group – and will strive to continue to do so.

c A significant component of the Group’s accounting, operational and HR functions are centralised at the Support Centre which enables effective oversight of in-store operations and results. The internal audit function focuses mainly on the assessed risks of inventory and cash management and identifying possible obstacles to achieving key targets. It is anticipated that this function will continue to evolve and play an increasingly significant role.

Market risk and financial viability c The Group increased turnover by 16% and trading profit by 17%. These results were achieved notwithstanding the subdued industry and competitive marketplace.

c Goals outlined in the previous report included: development of new markets in previously under-serviced sectors, and to grow existing markets. In this regard, improved revenue, profitability and a gain in market share were achieved across the Group’s operations through the policy of ‘the right stock at the right time’, an ongoing programme to ensure optimum inventory, range and service management.

c The Group’s stated goal is to achieve the status of world-class low-cost retailer, underpinned by alignment of customer satisfaction and profitability. In the current economic environment the Group’s challenge will be to leverage growth opportunities within the existing supply chain and store network.

c Intensified emphasis on innovation, technology, training and service will be required to retain industry leadership and grow market share.

c Implementation of ‘the right stock at the right time’ policy will remain central to the Group’s operations.



Reliance on key suppliers c The Group is reliant on key local suppliers (e.g. Ceramic Industries and Ezee Tile) and its growth targets are dependent on these suppliers meeting its demands in terms of volume, pricing and quality. Proactive management of these relationships ensured the Group’s requirements were met consistently throughout the year.

c Very close supplier relationships will remain a priority, including regular meetings and projection planning. The Group is a key customer to its suppliers, who therefore have a vested interest in retaining its business.

c In the event of inadequate supply, the Group could source alternative supply from other local suppliers (adhesive) or importers (tiles and sanitaryware).

c The Group will continue to monitor and ensure its suppliers’ capacity to ramp up production if required by the Group.

Supply chain management c Automated ordering and increased model stock levels were implemented across the retail operation. Notwithstanding significantly higher inventory demands, prudent management by the supply chain ensured consistent availability of merchandise.

c Increased inventory levels were matched by improved stock turn.

c Relationship building with international and local suppliers will remain a priority and is acknowledged to be critical to negating erratic supply, price fluctuations and volatility in the market. The Group’s intention to acquire a strategic stake in Ceramic Industries exemplifies this policy.

c Inventory management will continue to be improved through enhanced systems and processes.

Supply chain disruption

(Distribution Centre)

c The Group has in place disaster management plans to withstand disruption of operations due to supplier, shipping or warehouse storage problems.

c Maintaining prudent stock levels will ensure that any potential disruption to supply is managed seamlessly.

Remaining fashionable c The Group retained and grew market share as a result of prioritising the fashion and flair component of its offering.

c Ensuring that the Group remains the fashion leader will be facilitated through:

– Regular regional meetings and attendance at international trade fairs to gain insight into markets and product offering.

– Experienced brand managers in key positions.

– Cost/pricing adjustments and expansion of distribution channels (e.g. e-commerce).

International competitiveness c Evolving consumer trends pointed to growing international fashion tastes and demands for greater online shopping capabilities. Italtile’s rapid response to these developments assisted in entrenching the Group’s reputation as a trend-setter in the industry.

c In the current technology-driven era, the Group will prioritise greater use of web-based interaction and social media to ensure its offering remains contemporary and aspirational.

Foreign currency c Foreign currency fluctuations are managed keenly and all foreign liabilities are matched with forward exchange contracts on confirmation of order.

c In current volatile economic markets, management of foreign currency exposure remains a key priority.

Computer-based business processes c The Group’s comprehensive disaster recovery plan was fortified with the commissioning of a back-up datacentre to ensure uninterrupted functionality in the event of primary site failure.

c R14 million was invested in upgrading in-store technology and enhancing the Group’s online interactivity to optimise customers’ shopping experiences.

c Reliance on IT infrastructure is a core component of operations, and risk-mitigating activities related to continued upgrading of back-up facilities, soft-and hardware and training will remain a priority.

c Technology innovations will continue to be introduced to meet evolving consumer behaviour which is trending toward greater online activity.

Material issues continued



Liquidity, cash reserves and

Treasury risk

c The Group’s robust cash generating ability and prudent capital management ensured that cash reserves are in excess of operational requirements.

c Potential Treasury risks include:

– Sub-standard investment returns;

– Inadequate liquidity of investments to meet commitments;

– Institutional/commercial risk relating to funds into which investments are made.

c The Group has in place a Treasury policy which will continue to mitigate these risks.

Credit risk c Trade credit available through Italtile and CTM is managed and insured by Cladding Finance, an outsourced specialist debtors’ solutions business. Consumer credit is outsourced through RCS, an independent financial services Group specialising in credit products.

c In the current economic climate credit applications and credit management will continue to be subject to onerous scrutiny.

Brand reputation c Prudent investment in brand-building and ongoing review of the offering enabled the brands to grow market leadership in their respective categories.

c Brand reputational risks arise from: poor customer service; poor product quality and unrealistic pricing; poor staff management; negative environmental impact and non-compliance with legislation and standards.

c The Group’s primary objective to deliver an unparalleled shopping experience to customers will continue to underpin all activities and ensure the good standing of its brands amongst consumers.

c The Group employs experienced brand managers who attend regular regional meetings to gain insight into markets and product offering: it also has in place an employment equity policy; environmental sustainability programme; whistle-blowing facility; and utilises the services of a Health and Safety expert.

Property portfolio c The Group’s property portfolio has an estimated market value of R1,5 billion and has robust cash reserves. The portfolio delivered returns in line with the retail operations.

c Improving the quality of its properties remains the primary focus of this division. Identifying new and better locations and maintenance and upgrade of properties will be conducted on an ongoing basis to minimise risk and ensure the required rate of return.

Preservation of the organisational

philosophy and structure

c The Group’s business model promotes a culture of partnership and autonomy. Each business unit is managed and operated independently within the broader Group structure, thereby facilitating growth of management experience and expertise across the organisation.

c A culture of entrepreneurship will continue to be fostered to ensure preservation of the Group’s philosophy and structure. The existence of flat reporting structures will continue to facilitate transparent communication, oversight and mentorship. Optimal recruitment and training programmes will ensure the business model is entrenched.

12

Material issues continued

Italtile Limited integrated annual report 2012


Succession planning c Attracting, developing and retaining human capital remained a major focus. Mentorship and leadership programmes were prioritised, with in-house programmes anticipated to deliver five suitable candidates for store management positions annually.

c Ongoing development of leadership and management potential is recognised as a critical initiative.

Chairman’s mentorship programme c An ongoing management mentorship programme is conducted by the Chairman through which the values and ethics of the business are inculcated across the organisation.

c Developing depth of talent is a key priority in the organisation and is under the direct oversight of the Chairman.

SocialStakeholders: franchisees, employees, customers and the community


Recruitment and retention c Number of employees including franchised stores: 1 394 (2011: 1 283)

c Employee turnover: 17% (2011: 19%)

c Optimal recruitment processes, supported by relevant training designed to motivate and empower employees, are key to improved retention. In addition to these priorities, management’s goal is to develop a career path schematic for each individual career in the Group.

c Quantifiable measures will also be developed to evaluate the link between training and improved sales and service, a key factor for store managers in their Training ROI calculations.

c Employees are incentivised (via profit share and share schemes); in addition ownership models exist (including franchises and joint venture partnerships) and remain a key component of promoting an entrepreneurial culture in the Group.

Training c 919 (2011: 842) employees were trained in courses across the spectrum.

c 73% (2011: 40%) of all employees have been trained at the Academy for tiling, plumbing and laminate flooring.

c Existing courses will be reviewed and consolidated if required. The newly introduced Stellenbosch University certificate courses will be integrated into the Group’s existing training framework.

Transformation

BEE ratings

c Employment equity targets were once again exceeded.

c The Group’s status as a BBBEE contributor is Level 8.

c Continued achievement of employment equity targets will remain a priority.

c The BBBEE contributor status target for the year is Level 6, which will be achieved via socio-economic development, skills and management development, and procurement and supplier development.


EnvironmentalStakeholders: shareholders, franchisees, employees, suppliers and business partners, and the community


Water consumption c Roll-out to all stores of rainwater harvesting tanks and water-wise gardens commenced.

c Water consumption meters will be installed in all stores to afford real-time reliable monitoring.

Electricity consumption c Energy efficient technologies/lighting were implemented in all new, upgraded and relocated stores.

c A 3,2% saving was achieved between February 2009 and January 2011.

c The Group’s first fully energy-efficient Green store was completed and is anticipated to reduce energy consumption from 391 kWh/m² (standard store design) to 109 kWh/m².

c Retrofit of resource-saving devices and technology is targeted for existing stores.

c A target of 20% saving has been set for January 2015. Electricity meters and online monitoring will be installed in all stores to afford real-time reliable monitoring.

c Ongoing store audits will be conducted to deliver store-specific recommendations.

Recycling c 60% of stores have committed to the recycling programme (2011: 30%).

c The goal is to convert 70% of stores to the recycling programme by July 2013 and 90% by January 2015.

Carbon footprint c The second carbon footprint study confirmed a decrease of 8,34% in direct CO2 emissions per rand value of turnover.

c The third carbon footprint study has been commissioned and is expected to confirm a further reduction in direct CO2 emissions.

c The impact of shipping, road and air freight activities are under review with regard to possible measurement.

c Electricity and transport costs will be targeted for reduction.

Governance and regulatory environmentStakeholders: government, regulators, shareholders, franchisees, employees, customers, suppliers and business partners


Compliance with legislation c The Group recognises corporate governance as central to sustainability of the business, and accordingly is compliant with the Companies Act, JSE Listings Requirements, the King Code, BEE, EE and labour legislation, The Competition Act, the Consumer Protection Act and all relevant tax legislation.

c The Group regularly engages various professionals and advisers to ensure compliance with legislation. In addition, management will continue to attend workshops and training related to legislative and other updates, and will be supported by the external audit in ensuring compliance.

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.

Chairman’s statement



Overview

In these testing economic times and in the context of

a constantly evolving environment, retailers are

compelled to remain contemporary and relevant to

their customers. With 43 years of experience in this

industry, Italtile recognises that its greatest challenge

is to keep innovating and striving to ensure its offering

is aspirational, accessible and affordable.

The period under review served as a vital opportunity

to review the Group’s scorecard in terms of our

performance versus our ambitions. Key to this process

was to refocus our energy on honing our application

of basic retail principles in order to deliver an

unparalleled shopping experience to our customers.

In this regard, we paid renewed attention to

researching and understanding our customers’

desires better, and ensuring we had the right stock at

the right time. We beautified our stores and simplified

our customers’ buying decisions by creating intuitive

solutions. To complement our customers’ aesthetic

experience in our stores we invested in refining our

technology, warehousing and logistics systems,

aimed at creating a seamless shopping experience.

The common thread in making these strategic

improvements possible is the people who staff the

business. In this regard intensified effort was directed

at developing and leveraging this asset to its full

potential. Nurturing human capital is a constant theme

throughout this integrated annual report and illustrates

management’s commitment to the subject.

The results reported by the Group for the period are

representative of the success achieved in implementing

the abovementioned initiatives.

Chairman’s statement continued

In line with global trends, trading and buying patterns

continued to evolve as consumers started to favour

online interactivity and more sophisticated in-store

experiences.

Operations

South Africa

The Group’s improved results are derived

predominantly from organic growth in the business.

The retail operation reported increased revenue and

profitability, and a gain in market share was recorded

across the Group’s brands, Italtile Retail, CTM and

TopT and across their respective merchandise

categories. The Group’s supply chain, comprising

Cedar Point, International Tap Distributors (ITD) and

the Distribution Centre, also reported a solid

performance, with ITD delivering record sales and

profits.

Robust growth was experienced in emerging and

middle class market segments and further penetration

of outlying and rural areas was achieved. In terms of

regional performance, strong growth was reported in

Limpopo, Mpumalanga and Gauteng, with improved

performances in Botswana, Namibia, North West and

Free State provinces. The coastal regions continue to

underperform their inland counterparts.

Australia

The Group’s operation which comprises eight stores

in Queensland and New South Wales, delivered a

disappointing performance, with the business

reporting a loss for the period. In context, the

Australian operation contributes 6% to total Group

revenue.

Trading environment

South Africa and Africa

Reflecting similar trading conditions to those

experienced in recent years, the building industry

remained subdued with little investment in the sector;

typical of a downturn in the economy, some activity

was evident in the renovations market while the new

build segment remained largely stagnant.

Sustained instability in global economies continued to

force suppliers to seek new markets, and vast

quantities of Chinese and European product entered

the country in the review period.

Volatility in the market was exacerbated by aggressive

price positioning and margin pressure. Further

fragmentation of the industry was witnessed as

industry participants down-sized and consolidated as

unsustainable margins impacted their businesses.

Fashion and value remained the key drivers in this

sector with increasingly more sophisticated consumers

aspiring to international tastes.

Australia

The Australian economy featured a sluggish building

sector and low consumer confidence levels primarily

due to increased borrowing costs and the

implementation by Federal Government of new levies

and taxes.

Widespread flooding in Queensland badly impacted

the local economy; additionally, Government funding

and reconstruction work has to date failed to provide

the anticipated stimulus needed by the industry.

A sustained influx of cheap imports continued to

create trading volatility and margin pressure.



Adding value

Italtile is committed to satisfying the needs of our

customers while delivering acceptable profit growth;

the Group endeavours to create wealth for the benefit

of all stakeholders.

During the review period R1 036 million was paid to

suppliers for products and services, thereby creating

opportunities for them to employ staff to meet the

Group’s requirements. R140 million was paid by Italtile

to employees in the form of salaries, incentives and

benefits. These employees in turn supported their

families, contributing to the economic activity of their

communities and the broader economy. Some

R155 million was paid in taxation, for the ultimate

benefit of all South Africans.

Corporate governance

In the prior year, Italtile presented its first integrated

annual report. In the interim, substantial advancement

has been made in terms of the Group’s overall

application of King III, and a detailed analysis of this

information is contained in the Corporate Governance

report on page 42 of this document. In addition, a

comprehensive enterprise risk management exercise

was conducted during the review period, the results of

which are incorporated in the Material Issues report on

page 9.

We recognise that integrated reporting is a progressive

process and every effort will be made to ensure we

continue to raise our standard in this regard.

Intensified market competition and an oversupply of

cheap tiles served to squeeze margins. In response,

management has elected to increase its range of

European products which should restore margins and

add flair to the range.

The business has also signed a deal with a retail

partner to introduce carpets, natural wood and

laminate boards into the stores, with the intention of

promoting the operation’s ambition to be a

comprehensive floor covering specialist.

Management’s priority in the forthcoming period

will be to contain overheads, and a strategic

plan to restore profitability is being finalised at

present.

Results

The Group reported like-on-like system-wide turnover

of R3,52 billion (2011: R3,02 billion) an increase of

16%. Trading profit grew 17% to R523 million

(2011: R448 million) notwithstanding the Group’s

tactic to restrict price inflation in the current competitive

trading environment. Cash reserves improved 9% to

R917 million (2011: R839 million), demonstrating the

healthy cash generative nature of the business.

Dividend

The Board has approved a final dividend of 7 cents

per share (2011: 6 cents), which together with the

interim dividend of 7 cents per share (2011: 6 cents

per share) amounts to a total dividend of 14 cents per

share for the year (2011: 12 cents per share), an

increase of 17%.

The dividend cover remains unchanged at three times.

Increase in trading profit

17%Increase in system-wide turnover

16%

Chairman’s statement continued

Black Economic Empowerment (BEE)

Subsequent to the review period, Italtile’s BEE

structure was revised with the exit of BEE shareholder,

Arrow Creek, and the subsequent acquisition of that

entity’s 24,6 million shares by the Foundation Trust,

a registered public benefit organisation, in accordance

with the Group’s policy that the former Arrow Creek

shareholding continue to be held by a BEE entity. The

general meeting approving the transaction was held

on 14 August 2012.

Eighty five per cent of all distributions made by the

Trust will be for the benefit of black people, as

discussed below.

Community responsibility and

sustainability

In line with Italtile’s philosophy regarding responsible

corporate citizenship and long-term sustainability,

the Group strives to build relationships and partner

with those communities in which it trades. Investment

is made in providing and upgrading facilities and

infrastructure which benefit local communities.

A central theme for this investment is the link between

sport and education, with the belief that establishing

community sports facilities will assist in taking children

off the streets and provide them with a healthy

alternative which teaches values such as teamwork

and perseverance. This programme is exemplified by

the sports ground in Soweto, formerly a refuse dump

which was rehabilitated and refurbished with sports

facilities, and is managed and maintained on an

ongoing basis by the Group.

In compliance with the Companies Act, Italtile has

established a Social and Ethics Committee, which will

be responsible for monitoring amongst other matters:

the Group’s social and economic development;

responsible corporate citizenship; its impact on the

environment, health and public safety; consumer,

labour and employment affairs; and its relationship

with all stakeholders.

I am confident that this committee will further advance

the Group’s efforts to achieve a sustainable ethical

corporate culture within Italtile by providing effective

leadership based on an ethical foundation.

Environmental responsibility

A key element of the Group’s sustainability initiative is

to integrate our Green agenda into the daily operations

of the business. It is pleasing to report that further

progress was made in this regard, reflected by a range

of achievements discussed on page 33 of this report.

Of particular significance for the Group was the

opening of our first fully energy-efficient Green

store, Italtile Boksburg, which is anticipated to

reduce energy consumption from 391 kWh/m² to

109 kWh/m2. The success of this project will have

bearing on the construction of future Group stores.

It is rewarding to note that commitment to

environmental responsibility is gaining momentum

across the Group’s stores, reflected in the results of

our second carbon footprint assessment which

confirmed a decrease of 8,34% in direct CO2

emissions per rand value of turnover. A third carbon

footprint study has been commissioned and further

savings in energy and resource consumption is

anticipated.



We are satisfied that there is capacity in the local

market to increase consumption of the Group’s

merchandise, and accordingly, robust growth targets

have been set for year ahead. In contrast, our

expectations for the Australian market are more

restrained.

Appreciation

I would like to express my gratitude to the people

across our Group for their contribution to this satisfying

set of results and for their continued pride in being

members of this company.

Once again my fellow Board members provided

valuable strategic input and counsel, for which I am

grateful.

I would also like to thank our suppliers, advisers and

business partners for their contribution during the

year.

The unwavering support of our long-standing

shareholders is reward for our ongoing efforts to

deliver a superior investment proposition, and I thank

them.

Our customers are the reason our business exists and

grows. I trust this report will illustrate our commitment

to meeting and exceeding your expectations.

Human capital development

Mentorship, leadership and management programmes

are crucial for developing and retaining personnel over

the long term and these initiatives remain a core focus

in the Group.

Offer to Ceramic Industries Limited

(Ceramic)

Italtile has a long history of purchasing tiles,

sanitaryware and baths from Ceramic, which has

grown over time to become the Group’s most

important supplier. In order to support Italtile’s future

growth strategy, Italtile and Rallen (Pty) Limited, have

made an offer, subject to conditions precedent, to

acquire a maximum stake of 20% of all Ceramic

shares owned by independent Ceramic shareholders.

Shareholders were advised on 31 August 2012 that

the conditional Offer would be made at a purchase

consideration of R130,00 per share. Furthermore,

Ceramic’s Board has resolved to apply to the JSE for

the termination of its listing. A circular will be posted

to shareholders on or about 1 October regarding the

implementation of the Offer.

Prospects

Competition in the South African and Australian

markets will remain intense, with further rationalisation

of industry players inevitable. An increase in imports

from Europe is also likely as economies flounder and

new markets are sought.

Our focus in the year ahead will be on leveraging

growth opportunities within the existing supply chain

and store network. This will require intensified

emphasis on innovation, technology, training and

service.

Overview

Italtile’s overarching goal is to deliver an unsurpassed

and unique shopping experience to our customers.

Key strategies and initiatives are directed to achieving

that ambition, and the Group’s commendable results

for the review period are a reflection of intensified

focus on two of those broad thrusts, namely:

c consistent application of the basic principles of

retailing; and

c emphasis on human capital development.

Retail principles: Back to basics

During the period scrutiny on range and stock

management intensified. Across the Group the range

was rationalised and improved to display greater flair.

Investment in resources and global research served to

ensure that the Group entrenched its leadership

position as the trend-setter in the industry. Stores and

displays were refreshed to ensure a pleasant,

constantly interesting environment, and complete

stylish ‘solutions’ were introduced to afford customers

greater convenience in their purchasing decisions.

Continued investment in technology and infrastructure

and improved warehousing and logistics all served to

create a smoother, quicker and more convenient store

visit for customers. Notably, model stock levels were

increased and managed better to ensure consistent

availability of merchandise.

People: To power the business

There is no doubt that the people who work in

a business can be the key differentiator between

a good business and an exceptional one.

To achieve the Group’s robust targets and optimise on

growth opportunities presented, it is inescapable that

the people who work for Italtile need to be of an

exceptional calibre.

Operational review



The Group’s ambition to deliver an

unparalleled shopping experience was

advanced through renewed focus on

basic retail principles and nurturing

human capital.

Operational review continued

strong growth opportunities, largely a function of

the brands’ better understanding and response

to customer demands, and to attaining access to

previously under-serviced rural and outlying areas.

Results

Like-on-like system-wide turnover increased 16% to

R3,52 billion (2011: R3,02 billion), while trading profit

grew 17% to R523 million (2011: R448 million).

Margins reduced slightly, reflecting the Group’s

deliberate strategy to absorb the impact of currency

volatility and increased energy costs in the current

competitive trading environment. Average selling

prices were sub-inflationary and contained to certain

product lines, in a continued effort to entrench the

Group’s everyday value proposition.

Inventory levels rose to R339 million (2011:

R241 million) in line with the intentional tactic to

ensure optimum stock levels and consistent availability

of merchandise – a factor which played a significant

role in the Group’s improved results.

Capital expenditure of R170 million (2011:

R135 million) was incurred during the period,

predominantly related to improving the quality of the

Group’s property portfolio. Notwithstanding this

outlay, cash reserves increased to R917 million (2011:

R839 million), demonstrating Italtile’s robust cash

generating ability.

The Group’s net asset value grew to 218 cents per

share, an improvement of 17%.

Divisional review

Consistent themes are woven through the review of

each business unit, namely: unwavering application of

basic retail principles and focus on people.

Throughout the organisation this period witnessed an

intensification of focus on the human capital in the

Group. With a view to closing the gap between

Italtile’s current performance and its targeted

performance, training initiatives have been afforded

priority status. In this regard, a range of mentorship,

leadership and management programmes have been

implemented, to widespread approval from

employees. Key to all training is the recognition that

the Group’s greatest challenge and opportunity is to

attract, advance, empower and retain exceptional

people. Clearly established career paths will assist in

achieving this.

Financial review

Trading conditions

Generally, the building industry remained subdued

with limited public or private sector investment. The

market continued to experience an influx of product

from Chinese and European suppliers targeting new

markets for growth opportunities. This led to greater

fragmentation of the sector with aggressive supplying

of opportunistic traders who carry limited stock and

forego margins in an effort to gain a foothold in the

market. This short-term strategy will inevitably lead to

further rationalisation of industry players.

Competition remained extremely intense in the

polished porcelain and entry level tile market, and in

the laminate board segment the price war continued

unabated.

Steady growth and a gain in market share were

achieved across the Group’s retail brands, Italtile,

CTM and TopT, as well as the supply chain businesses,

comprising International Tap Distributors and Cedar

Point. The middle class market continued to provide



to encapsulate Italtile’s new-look retail design concept;

both developments have been favourably received by

clients. In line with its ambition to grow market share,

the product range was strategically broadened to

cater to a wider segment incorporating the upper end

of the middle class market, and has started to deliver

pleasing results. Implementation of the ‘Italtile Way’

was completed; this is the brand’s best practice

benchmark programme linked to service and

customer experience. Independent evaluation has

confirmed that this initiative has added significant

value to Italtile’s offering.

Further down-sizing of competitors and sustained

sluggishness in the trading environment prevailed. In

this context, the brand performed well to gain market

share across the product offering, a reflection of a

range of operating improvements, including:

c improved in-stock supply based on enhanced

automated ordering programmes;

c brand-centred promotional campaigns for ranges

including Cotto sanitaryware and Hans Grohe

brassware;

c intensified training initiatives including training

by international suppliers, and continued

implementation of the ‘Mystery Shopper’

programme to measure success of the ‘Italtile Way’

ethos; and

c enhancements to the brand web page, to cater to

the growing trend by clients to conduct pre-

purchase research. The improvement in the ‘virtual

store’ experience has resulted in a significant

increase in visits and length of time spent on

the site.

Underpinning these themes is the Group’s ambition to

be a world-class low-cost retailer, embodying an

optimal combination of profitability and customer

satisfaction.

Italtile Retail

overview and performance matrix

Nature of business

Leading fashion retailer of exclusive ranges of tiles, bathware and related products.

Target market Premium-end consumers and professional projects market.

Number of stores

8

Key performance indicators

Sales

Average price inflation

Margins

Net profit

Stock turn

Trends

26%

1%

Key differentiators

Trend-setter and leading buyer of exclusive quality international and local products.

Widely recognised as industry front-runner in environmentally conscious products.

Established specialist expertise and nationwide network.

Strategic positioning

Live beautifully.

The Italtile Retail brand delivered a satisfying

performance for the period, reporting good growth in

revenue and profitability, and success in achieving

goals outlined at the end of the prior year.

The brand opened its flagship latest generation store

in Boksburg, and renovated its Bryanston showroom


in Johannesburg North and South will be opened in

late 2013, and over the longer term three to five year

horizon, additional opportunities for expansion will be

considered in other local and Southern African

markets.

CTM


Nature of business

Leading specialist retailer of tiles, laminate boards, taps, sanitaryware, bathroom furniture and accessories.

Target market Middle income DIY customers and small builders.

Number of stores

89 (81 in South and Southern Africa, and 8 in Australia).


Sales


Margins

Net profit

Stock turn

Trends

16%

1%

Key differentiators

Unrivalled buying power locally and internationally.

Year-round value offering.

Integrated supply chain ensuring consistent availability of stock.


Big savings. More style.

CTM delivered solid growth across its merchandise

categories and continued to gain market share in the

emerging middle class segment. Particularly strong

growth was experienced in Limpopo, Mpumalanga

and Gauteng, with improved performances in

Botswana, Namibia, North West Province and the

Free State. The coastal regions tended to lag their

inland counterparts.

TILES: Tile sales volumes increased by 8% across

CTM’s offering. Sales of imported tiles outstripped

local tile sales, aligned with evolving demand for

Particularly strong growth was experienced in the

bathware segment, including a range of water-wise

products. Eco-friendly ink-jet technology tiles first

introduced to the country by Italtile several years ago

continued to gain appeal amongst consumers. Almost

50% of Italtile’s range now comprises these latest

technology products sourced from Italian and Spanish

specialists.

Management’s stated goal to grow the brand’s

Commercial Projects base was advanced with the

successful completion of a prestigious bank office

block in Menlyn, Pretoria. A range of Italtile products

including tiles, sanitaryware and brassware is

showcased in this project. The building has a 4-star

Green rating and serves as an excellent reference for

architects and other professional contractors. There

are currently several other commercial projects in the

specification phase with promising prospects.

priorities and prospects

Italtile has a long-standing reputation in the industry as

a leader of style and flair. In a fluid industry featuring

rapidly changing consumer tastes, management’s

challenge is to constantly stay ahead of fashion

developments and continue to set trends.

Attracting, retaining and growing human capital is a

major focus in this business, and continued investment

in this regard will remain a priority.

The obvious success of Italtile’s improved website

offering has promoted the development of a web-

based programme aimed at assisting professionals to

simplify and streamline the specification phase of

projects. This offering is anticipated to provide Italtile

with an important competitive advantage amongst its

target audience.

The new Boksburg and revamped Bryanston stores

are expected to make an important contribution to

revenue growth in the year ahead. A further two stores



LAMINATE FLOORING: The laminate board category

remained keenly contested, featuring a proliferation of

opportunistic suppliers and aggressive price

positioning, resulting in intense margin pressure.

Whilst these factors constrained the robust growth

experienced in the prior year, CTM’s laminate board

offering, Elf, continued to make inroads into new

markets and has achieved success with ranges

introduced specifically to meet emerging market

tastes.

At the end of the prior year, management identified

CTM’s primary challenges to include: improving the

offering in collaboration with the supply chain;

progress training initiatives and leadership

development; and capitalise on opportunities to

innovate and set new trends.

In this regard, a number of achievements can be

reported on:

c Supported by a successful TV and tabloid

campaign, CTM entrenched its ‘Big savings. More

style’ positioning with a range of activities including

store and signage revamps, improved layouts, and

clearer pricing in-store.

c Extensive market research was conducted to better

understand customer demands and resulted in

rationalisation of the range matrix across the

brand’s merchandise categories and the

development of complete product ‘solutions’.

c CTM’s tile range was re-designed with greater

focus on quality and flair. The introduction of ink-jet

technology in tile manufacturing has significantly

improved the stylishness of products.

c Introduction of a wide range of kitchen sinks has

been well received. Based on this success, a range

of CTM-exclusive products is being developed and

will be launched in the first quarter of 2013.

c CTM’s policy of ‘The right stock at the right time’

affords the brand strong competitive advantage,

international products at competitive prices. The

introduction by the Group of unique products such as

large format glazed porcelain patterned tiles, not

manufactured in this country, also served to grow the

market in this category. Intense competition continued

to be experienced in the entry-level product price

range. Whilst most of CTM’s imported tiles were

sourced from Eastern markets, instability in European

economies also provided good buying opportunities.

The implementation of cutting-edge ink-jet technology

by local manufacturers has started to yield highly

stylish, affordable products that compete favourably

with imported ranges. Advancements in this regard

coupled with anticipated further depreciation of the

rand, will probably impact CTM’s local to imported tile

ratio.

BATHWARE: CTM gained further market share in the

bathware segment of the business, delivering growth

of some 27%, predominantly due to improved ranges

and the introduction of new products, as well as

consistent availability of stock in the stores. Brassware

and accessories sales grew in the order of 30%. A

new, exclusive range of Hans Grohe taps was

introduced and has proved popular, whilst CTM’s

Tivoli tap range continued to gain brand equity,

supported by a high profile TV campaign and in-store

promotions.

The previously underperforming bathroom furniture

segment recorded growth of 37% attributable to an

extended range and improved availability of

merchandise. Sales of sanitaryware grew 20%,

benefiting from automated ordering and higher

model-stock levels. An interesting trend witnessed

during the period was the growth in demand for high-

value colour products. This is a function of CTM’s

increased penetration of emerging markets, and the

brand is now regarded as a serious player in this niche

colour sanitaryware and bath market.


TopT


Nature of business

Retailer of tiles, laminate boards, taps, sanitaryware, hardware and accessories.

Target market Entry-level value offering strategically situated in close proximity to under-serviced rural and outlying markets.

Number of stores

15


Sales


Margins

Net profit

Stock turn

Trends

41%

1%

Key differentiators

Flexible, opportunistic product range.

Availability of stock and accessibility to market.

Strong community relationships.


Your No. 1 store that saves you more.

The under-serviced rural and outlying markets

continued to provide good growth opportunities for

TopT. The brand’s primary strategy to offer accessibility

to affordable products enabled it to gain momentum

and grow market share across the product range.

TopT reported solid organic growth of 25% for the

period, although margins were constrained by

extremely competitive trading conditions.

The business benefited from improved penetration of

existing markets and extended its presence with the

opening of five new stores in Zeerust, Pretoria West,

Thembisa, Nelspruit and Witbank. Greater attention

was paid to improving the shopping experience

through an enhanced product range, an intensified

and the implementation of an automated

replenishment system which increased stock

availability in the stores to support increased

turnover has been extremely important in delivering

on this proposition.

c In light of increased inventory volumes, warehouse

efficiencies and stock movement have become a

key focus area. Storage and logistical improvements

have been implemented, which combined with new

barcode scanning technology have resulted in

improved inventory management, which in turn has

made for a better customer shopping experience.

c Improved training has been central to CTM’s

performance during the period. Employee

competence levels have risen as a result of

increased in-house supplier training, theoretical and

practical training at the Group’s Tiling, Laminate

and Plumbing Academy, and the introduction of a

range of career development courses focused on

mentorship, management and leadership. In the

last quarter, the Group commenced a partnership

with Stellenbosch University to conduct a range of

Management Certificate courses for CTM

candidates.


Innovative product ranges will continue to be sourced

across the merchandise categories. The introduction

of new lines of accessories and taps is scheduled for

the first quarter of 2013, whilst new ranges of

European tiles and new-technology local tiles will be

introduced on an ongoing basis to entrench the

brand’s style offering and commitment to customers

that CTM stands for the right of every South African

to have a beautiful home.

Training will remain a priority, facilitated through in-

house and external training programmes.



ITD


Nature of business

Importer and distributor of brassware and accessories.

Target market Predominantly (90%) Group brands CTM and TopT; and a small open-market client base.


Sales


Margins

Net profit

Stock turn

Trends

31%

Key differentiators

Integral component of the Group’s supply chain.

Long standing relationships with international suppliers and extensive import experience.

State-of-the-art robotic warehouse facility.

Notwithstanding the aggressively competitive trading

environment, ITD succeeded in gaining market share

across its offering and improved on the solid

performance reported in the prior year to deliver

record sales and profits. These results are attributable

to improved stock management, and range and

warehouse efficiencies achieved through the following

initiatives:

stock management and range

c Enhanced automated ordering systems

implemented in the stores, which increased stock

on hand supplies;

c Introduction of automated stock ordering from

international suppliers;

c Improved variety and flair in the range with the

introduction of exclusive Hans Grohe ranges, and

new-look colour and other product ranges sought

by emerging middle class consumers;

focus on innovation and retail flair in-store, and

increased skills and product training amongst staff. As

a result of these initiatives, TopT’s market appeal was

extended from its traditional entry-level consumers to

include cost-conscious middle class bargain hunters.

Intensified market research and close community

relationships resulted in an improved understanding of

customer demands which fuelled sales growth, while

highly specific community marketing campaigns

continued to deliver strong benefits for the brand.


TopT’s challenges in the forthcoming period will be to

source suitable operators and sites for new stores.

Key priorities will include increased control of

overheads to support the brand’s lowest-cost value

offering. Ongoing staff training will remain a core

focus.

In the short term, roll-out of the store network will

continue to be implemented on a regional basis in

South Africa. Over the longer term, TopT’s suitability

for expansion into the African market is an obvious

consideration for the Group.

Support services

The components of the Group’s vertically integrated

supply chain are: Cedar Point, an importer and

distributor of tiling tools, laminate boards, cabinets

and accessories; International Tap Distributors (ITD),

an importer and distributor of taps and accessories;

and Distribution Centre, which sources imported tiles

for the retail brands and provides warehousing and

distribution facilities to the Group.


Brassware and accessories are perceived as high-

fashion products and continued research will be

directed at sourcing innovative stylish ranges to

improve the Group’s competitive advantage.

ITD will be introducing a new Italian brand, Idral,

custom-designed specifically for the medical sector.

This will be retailed through the Italtile Projects division

and is a leading innovation in the local market.

ITD’s application for SABS accreditation has been

advanced with the formal certification of two tap

ranges and further accreditation of other ranges

anticipated in due course. This endorsement will have

significant benefit in growing the business’s customer

base.

Expansion of ITD’s warehouse capacity will commence

in the first quarter of 2013 and is anticipated to deliver

further improvements in efficiency.

Cedar Point


Nature of business

Importer and distributor of tiling tools, laminate boards, cabinets, accessories and décor.

Target market CTM and TopT store network.


Sales


Margins

Net profit

Stock turn

Trends

27%

Key differentiators

Integral component of supply chain across merchandise categories.

Strong relationships with international suppliers.

Leading buyer and supplier of laminate board range in South Africa.

c Good progress made in reducing slow-moving

stock;

c Leveraged the Tivoli brand-building advertising

campaign and increased the ranges into CTM and

TopT stores with significant success; and

c Intensified retail training of sales and product skills

and revamped displays throughout the store

network thereby improving the customer shopping

experience.

Warehouse

c Invested in and upgraded robotic technology,

thereby fine-tuning efficiencies and reducing

downtime; and

c Reorganisation of stock receipt and despatch

systems to streamline and accelerate these key

functions.

ITD’s price increases over the period were largely sub-

inflationary and limited to certain ranges in the

offering. The effect of rand weakness in the last

quarter on the cost of imports was to some extent

offset by European suppliers seeking new markets

and offering competitive prices, enabling ITD to pass

on cost savings to its customers. This is best

illustrated by the Group’s affordable, high quality Tivoli

tap range imported from Italy, which serves as an

important competitive advantage for the Group.

While Chinese ranges continued to improve in quality

and style, product prices increased sharply as a result

of higher labour costs and the impact of exchange

rate fluctuations. For the most part, ITD absorbed

these price increases to ensure sustained

competitiveness.


In-store training via ITD’s agents has delivered a

measurable improvement in sales growth, and

therefore remains a key focus area.



The décor category remains a key growth area for the

business. A significant strategic shift is currently

underway to restructure Cedar Point as a wholesaler

of décor to the Group, by integrating supply from the

Group’s existing external local suppliers into Cedar

Point’s operation. The process will involve rationalising

the ranges offered by these suppliers and managing

the distribution of product into the stores. The benefits

of integrating this function into the supply chain will

include improved stock management (investment,

warehousing and stock on time) and greater

convenience and efficiency for store operators.


Cedar Point’s priority focus areas in the period ahead

include continued innovation in its product range and

merchandise displays, ongoing training for staff and

customers, and intensified cost containment.

The volatility of the exchange rate has an important

effect on Cedar Point’s margins, and hence

management’s strong relationships with international

suppliers are critical in ensuring the sustained

profitability of this business.

Significant growth opportunities exist in the décor

component of the business and will be realised firstly

through integrating external supply into Cedar Point’s

wholesale function, and furthermore by improved

alignment of products with the Group’s tile and

sanitaryware offering. The development of complete

‘solutions’ comprising suites of matching floor and

wall tiles, sanitaryware and complementary décor will

afford this business an important advantage in a

competitive market segment.

Cedar Point’s results improved across its merchandise

categories, although margins were impacted by the

unfavourable exchange rate and intensified

competition in the laminate board market.

Notwithstanding the fiercely contested trading

environment, the Elf laminate range, which comprises

30% of Cedar Point’s business, successfully gained

market share amongst its traditional customers and

grew the category into new markets. Central to this

growth was:

c the extensive in-store assessment conducted

across the CTM store network which culminated in

improved product training, ranges and displays;

c Cedar Point’s ability to maintain competitive price

points through spirited supplier negotiations; and

c the well received profile-raising Elf flooring

advertising campaign which took place during the

year, entrenching this predominantly German

product range in the market as a fashionable floor

covering, based on its stylishness, user guarantees

and unmatchable price.

To meet growing demand for the product in under-

serviced rural and emerging markets, new ranges

have been introduced and have met with favourable

response.

Particularly strong growth was experienced in Cedar

Point’s tiling tool and cabinet category. The introduction

of new ranges, including ornate cabinets, to meet

changing consumer tastes played an important role in

this growth.


In order to meet customer demands, the Distribution

Centre ensures that its comprehensive offering

includes ‘standard range’ items as well as high-

fashion products. Management’s continued focus is

on setting style trends and introducing international

flair to the local market.

Reflecting recent evolving customer buying trends,

sales of imported glazed porcelain tiles grew at a

faster rate than polished porcelain products.


The primary value that this business adds to CTM and

TopT is management’s expertise in sourcing large

quantities of latest fashion affordable products which

give these brands a competitive edge in the market.

Staying ahead of fashion trends and robust supplier

negotiations will remain a priority to ensure continued

delivery on this service.

Current economic instability in Europe and resultant

product price reductions provide opportunity for the

Group to explore new supply markets; the relative

stability of the euro compared to the US dollar

supports this tactic. Accordingly, increased volumes

of product will be imported from Spain and lower

volumes from China in the forthcoming six months.

This development will afford the introduction of a

variety of new, cutting-edge tile ranges at competitive

prices.

Prospects for the year ahead look favourable, and

management’s commitment is to achieve revenue

growth and profitability in line with the results reported

in this review.

Distribution Centre


Nature of business

Procures stock for the Group’s retail brands, and is the single largest importer of polished and glazed porcelain tiles in South Africa.

Provides warehousing, distribution, logistics and foreign exchange services to the Group.

Target market CTM, TopT, Cedar Point and ITD.


Sales

Margins

Net profit

Stock turn

Trends

46%

Key differentiators

Long-standing relationships with international suppliers and transport agents.

Extensive (+30 years) import experience.

Strong balance sheet facilitates optimal investment in inventory.

This business delivered a pleasing performance,

growing revenue across its customer base by 46%.

Rand value sales to the CTM store network improved

by 40%, equating to an increase in square metre sales

of 42%.

Margins were slightly lower than forecast as a function

of absorbing some of the impact of rand weakness

and the sharp increase in diesel prices to ensure that

the Group retained its price leadership in the keenly

contested imported tile segment.

The division’s focus on consistent availability of

affordable, fashionable stock played a key role in its

gain in market share during the period.



c Commissioning of a secondary datacentre for the

Group’s SAP hosting at a cost of R1,2 million. This

back-up facility is vital to ensure uninterrupted

functionality in the event of failure at the primary

site.

c Development of a web-shopping functionality on

the CTM website, aimed at enabling customers to

view products and create quotes online from the

comfort of their homes. The first version of the

CTM Online Store was implemented at a cost

of R0,7 million. Initial consumer response to this

offering has been very favourable.


The IT environment holds substantial potential to

enable the Group to achieve its growth objectives and

improve customer satisfaction. In this regard, ongoing

attention will be paid to opportunities to unlock

strategic value.

Further development will be conducted on the CTM

website’s Online Store functionality aimed at evolving

the offering into a comprehensive store service

through which customers are able to buy products

24 hours a day and receive delivery of their orders

directly to their homes.

The Group is also developing an online automated

payment card authorisation system that is fully

integrated into SAP, aimed at reducing customer

checkout time and minimising operator errors.

Information Technology


Nature of business

Provides relevant, effective IT solutions to enable an optimal shopping experience in the Group’s retail stores through ensuring simplicity for the end user, maintenance of data integrity, and minimising downtime and risk.

Target market The Group’s head office, retail operations and support services businesses.

Key performance indicators and achievements:

SAP network upgrade

Management of potential downtime and system failure risk

Roll out of technology

Improved interactivity of retail websites

In support of its sustainability strategy and goal to

achieve world-class low-cost retailer status, the Group

invested R14 million during the review period in a

number of key infrastructure and information

technology (IT) projects which include the following:

c Roll-out of mobile handheld barcoded point of sale

(POS) devices to the entire CTM network and

introduction of the technology to four pilot TopT

stores. This programme was completed on time

and on budget in December 2011 at a cost of

R8 million. The mobile barcoded POS environment

has made a significant improvement to the speed

as well as quality of customer service, and affords

the Group an important competitive advantage.

c Upgrade of the Group’s SAP network from ECC5 to

ECC6 at a cost of R0,7 million. The upgrade was

effective from March 2012 and started delivering

operational improvements immediately.


In terms of the Group’s retail operations, the following

developments were recorded:

ITALTILE: This brand’s latest generation Green store

opened in Boksburg during the year, with two new

stores planned for Johannesburg North and South in

the forthcoming year. The longer term three to five

year vision for expansion includes a further five stores

across South and Southern African markets.

CTM: Whilst no new stores were opened, a range of

renovations, extensions and relocations were

conducted across the CTM store network. The brand

will open a new store in Northriding, Gauteng and

Nairobi, Kenya in the year ahead. The CTM network

continues to offer good growth potential and further

store roll-out is constantly being pursued, pending

availability of suitable sites.

TopT: Improved its market presence with the

opening of five new stores and closure of three

underperforming stores. Most of the operations trade

out of rental properties and whilst the intention is to

convert this model to owned-properties, it must be

noted that reasonably priced land in rural and outlying

areas is in short supply due to tightly held land-

ownership patterns. Areas such as Mpumalanga,

North West Province, Limpopo and KwaZulu-Natal

are currently being considered for expansion

opportunities.

The Group’s environmental policy is an important

factor in the property portfolio’s operations. All new

properties and renovations to existing properties align

with Italtile’s efforts to reduce its carbon footprint. Low

energy consumption programmes include optimal

utilisation of natural light in the stores, harvesting of

rainwater, recycling of water and waste, establishment

of water-wise gardens, composting programmes, and

conversion of inefficient electrical systems to new

technologies.

Property Investment


Nature of business

Underpins the Group’s retail operations by ensuring that stores are optimally located on high profile destination sites or within easy access of previously under-serviced rural and outlying areas.

Target market Italtile, CTM and TopT store network.

Key statistics

Portfolio value

Number of stores

Capex incurred

Portfolio changes

New stores opened

Stores renovated/relocated

+R1,5 billion

112 in South and Southern Africa and Australia

– 89 CTM stores

– 8 Italtile stores

– 15 TopT stores

R88 million on new properties in South Africa and R36 million in Australia

4 properties acquired and 2 sold

6 (1 Italtile and 5 TopT stores)

12

Improving the quality of its properties remains a

consistent theme for this division. In light of the role

this portfolio plays in supporting the Group’s retail

operation, the division’s continued focus remained on

evaluating and enhancing property investments

through identifying new and better locations, and

maintenance and upgrade of properties to create

enhanced shopping environments for customers.

Generally, the property market remained subdued, in

line with recent prior years. Statistics show that while

there was some activity in the entry-level residential

market and early signs of improvement in the

commercial property market, this was on a very

limited scale.



This division’s aim to align and integrate the Green

agenda into the day-to-day processes and functioning

of the business continued to gain momentum. Buy-in

and adoption by store operators and employees of

the agenda has been widespread and commitment to

converting all stores to energy-, water-, and waste-

efficient operations has grown.

A range of initiatives were implemented in the review

period:

c The third carbon footprint study (FY2012) has been

commissioned and is expected to reveal further

reductions in CO² emissions.

c Widespread implementation of the Eco icon Green

accreditation symbol by the Italtile stores. This

bespoke standard, designed by the Group to

create awareness of the environmentally beneficial

aspects of products, has found favour with Italtile’s

environmentally conscious consumers.

c The planting of 87 trees at Zimasa Community

School in Langa, Cape Town, to offset the CO²

impact of holding an annual Carbon Neutral CTM

conference.

c A rehabilitation programme centred around the

Group’s head office environs, incorporating a clean-

up the local river and the greening and reforestation

of the area including the removal and containment

of invasive alien tree species and planting of

indigenous trees.

c Awarding of the first-ever R50 000 Green Excellence

Award (to CTM Polokwane) for excellence in

implementing the Group’s Green agenda.

c The most significant milestone achieved during the

year was the opening of the Group’s flagship Green

store, Italtile Boksburg. Designed to optimise indoor

environmental quality and reduce resource

consumption, the building maximises natural light,

insulation and solar energy, utilises evaporative

Improved insulation of buildings is also a key focal

area for future store improvements, based on the

positive effect of combining this environmentally

friendly solution with an enhanced shopping

experience for customers.


Identification and maintenance of optimal sites to best

represent the retail operations will remain this division’s

core focus. In this regard, a range of properties is

being explored at present related to all three of the

Group’s brands, and afford interesting potential.

Innovations in new building methods are currently

being investigated, aimed at reducing construction

time and costs and improving efforts to implement the

Group’s Green agenda. If proved feasible, these will

have a significant effect on further store roll out across

the Group.

Environmental sustainability


Nature of business

Measures, manages and reduces the Group’s impact on the environment and promotes its long-term sustainability.

Target market The Group’s head office, store network and suppliers.


Electricity savings

Water

Recycling

Carbon footprint

A 3,2% saving has been achieved between February 2009 and January 2011.

Roll-out of rainwater harvesting tanks and water-wise gardens from only new to established stores.

60% of stores have committed to the recycling programme (2011: 30%).

The recently completed second study (FY2011) confirmed a decrease of 8,34% in direct CO² emissions per rand value of turnover.


Human Resources and Training


Nature of business

Adds value by developing and empowering human capital through relevant training and support, and providing an efficient payroll and administration function.

Target market Head office, franchisees and employees.


Skills training and competencies

Staff retention

Compliance with employment equity targets

Cost to stores

Trends

This division’s philosophy is that the Group’s primary

asset is its people – and the success of the business

lies in attracting, developing and retaining the best

calibre of personnel possible.

Three key initiatives were undertaken during the

period:

c Streamlined and rationalised in-house product and

skills training programmes from 43 to 23 courses,

aimed at adding value through improved relevance

and reducing costs to stores. Greater emphasis

was placed on cost-effective video-based training

and in-store supplier training as well as outsourcing

training to best-of-breed specialists. In-house

leadership programmes aimed at developing

superior store operators are ongoing. These six-

to nine-month training programmes are designed

to deliver an average of five successful store

operators per year.

cooling, implements water-storage and harvesting

practises, and features an indigenous garden.

Sophisticated metering equipment will facilitate

enhanced energy usage control.

A comparable, standard-design building, would

consume approximately 391 kWh/m² of energy

whilst this custom-designed energy efficient

structure is projected to utilise only 109 kWh/m² per

annum. Close measurement of this performance

will be conducted and will inform construction of

future Group stores.


This division’s priority is to continue to reduce Italtile’s

impact on the environment.

Future initiatives in this regard include closer

collaboration with the Group’s training department,

aimed at increasing employees’ exposure to the

Green agenda.

Improved monitoring and benchmarking will be

facilitated through installation of water and electricity

meters across all CTM and Italtile stores.

Further opportunities will be explored to expand on

the Eco icon programme in-store to promote

environmentally responsible products at point of sale.

At present, efforts are underway to integrate carbon

footprint data capture and analysis into the Group’s

SAP platform. Once completed, this intervention will

have a significant effect on improving measurement

and evaluation of the Group’s environmental impact.



Outlook

The retail environment is a rapidly evolving one, driven

by ever-new technology which is changing the way

consumers shop. The Group recognises that to

‘touch’ customers’ lives and appeal to younger

generations of consumers entering the market

requires a move away from conventional trading to

embracing greater use of web-based interaction and

social media. The Group will continue to invest in

technology to ensure that its offering remains top of

mind and within easy access.

In the short term, instability in European markets

presents opportunities to source high quality

fashionable product at affordable prices, and the

Group will leverage this potential.

Management is satisfied that the Southern African

business will continue to grow at current rates in the

forthcoming period. Continued focus on innovative

trading and overhead containment will remain key to

the Group’s goal to achieve an optimal balance of

customer satisfaction and profitability.

Appreciation

Tribute must be paid to the people of Italtile for their

first-rate efforts this year.

Each of the divisions and business units across the

Group delivered an improved performance in the

period under review, both in terms of profitability and

meeting strategic objectives. In the current economic

climate and trading environment this is a notable

achievement.

Italtile’s aggressive growth targets and high

performance culture demand absolute commitment

from each person who works in the business; the

results reported on in this review are a reflection of

that dedication and support for the Group’s vision to

be a world-class low-cost retailer.

c Introduction of management and leadership

development programmes in conjunction with

the University of Stellenbosch. Response to this

initiative has been remarkable, and application for

these certificate courses has been oversubscribed.

c Implementation of an integrated payroll system to

enhance operating efficiencies.

The Practical Tiling, Plumbing and Laminate course

conducted at the Group’s Training Academy has been

successfully completed by 919 staff since opening in

2009, comprising almost 73% of the Group’s staff

complement, and up from 40% at the end of the prior

year. This supplier-based training has played an

important role in equipping sales people with practical

and theoretical product knowledge. The course will

continue to be evolved, aligned with the introduction

of new products and services in the stores.

Employment equity (EE) remains a priority for the

Group and targets set in the EE Plan were once again

exceeded, in line with prior year achievements.


This division’s primary goals centre on developing

human capital for the long-term benefit of all

stakeholders. Promoting commitment to training by all

parties will be achieved by adding value at reduced

cost, and establishing quantifiable measures which

will accurately evaluate the link between training and

improved service and sales. In addition, management

plans to develop a schematic to illustrate all individual

career paths in the Group with a view to improving

manpower retention.

Management’s immediate imperative is to bed-down

and integrate existing and new training courses,

and where required, continue to rationalise

underperforming courses.

Our customers are the reason this

business exists and grows. Our

commitment is to continue to strive

to meet and exceed their expectations.



Group reviewfor the year ended 30 June 2012

(All amounts in Rm’s)

Seven-yearcompoundgrowth % 2012 2011 2010 2009 2008 2007 2006

operationsTurnover 6 1 845 1 521 1 354 1 303 1 635 1 477 1 285Trading profit 8 523 448 389 361 424# 393 338Profit before taxation 8 550 469 404 369 405 408 352Profit attributable to equity holders of the parent 8 378 321 273 257 275 270 233Headline earnings 8 377 319 274 258 275 270 237Ordinary dividends paid 1 119 101 88 107 84 95 114

financial positionNon-current assets 1 223 1 070 991 939 890 772 550Current assets 1 400 1 226 1 075 994 680 573 567Equity attributable to equity holders of the parent 1 931 1 637 1 422 1 306 1 158 944 764Non-current liabilities 323 327 344 343 101 12 11Current liabilities 292 262 239 244 286 357 312

cash floWCash flows from operating activities 226 254 (283) 228 107 168 167Cash flows utilised in investing activities (148) (107) (72) (71) (138) (249) (121)Cash flows from/(utilised by) financing activities — (19) 399 229 54 (4) (4)Cash and cash equivalents at end of year 917 839 711 667 281 258 343

# Trading profit excluding BEE share option expense of R25 million in 2008.



financial ratiosreturnsTrading profit to turnover (%) 28,3 29,5 28,7 27,7 25,9 26,6 26,3Return on shareholders’ interest (%)(1) 21,2 21,0 20,0 20,9 26,2 31,6 33,3Average consumer price index (%)† 5,5 5,0 4,2 6,9 12,2 7,0 4,9Earnings per share (cents) 6 41,1 34,9 33,0 32,3 34,6 33,9 29,3Headline earnings per share (cents) 5 41,0 34,7 33,1 32,4 34,4 33,9 29,8Ordinary dividends declared per share (cents) 6 14,0 12,0 11,0 11,0 12,0 11,4 9,8Special dividend per share (cents) — — 60,0 — — — —

productivityTurnover per employee (R000’s) 1 2 701 2 498 2 375 2 310 2 809 2 499 2 596Total assets per employee (R000’s) 9 3 840 3 770 3 625 3 427 2 698 2 276 2 257Trading profit per employee (R000’s) 2 766 736 682 640 729 665 683Turnover growth (%) 21,3 12,3 3,9 (20,3) 10,7 14,9 24,5Number of employees 683 609 570 564 582 591 495Number of stores 112 108 104 101 98 93 98– Owned 50 47 47 43 44 44 42– Franchised 62 61 57 58 54 49 56

definition(1) Return on shareholders’ interest: Profit attributable to equity holders of the parent as a percentage of average equity attributable to equity

holders of the parent.

†As per Statistics South Africa.

Group review continued

for the year ended 30 June 2012


2012 2011 2010 2009 2008 2007 2006

financial ratios (continued)solvency and liquidityInterest cover (times)(1) 21,8 18,7 14,4 9,0 28,5 196,5 112,7Dividend cover (times)(2) 3 3 3 3 3 3 3Gearing ratio (%)(3) 17,7 20,2 24,1 26,1 8,5 1,2 1,3Current ratio (times)(4) 4,8 4,7 4,5 4,1 2,4 1,6 1,8Acid test ratio (times)(5) 3,6 3,8 3,6 3,3 1,5 1,0 1,3

definitions(1) Interest cover: Trading profit divided by finance cost.(2) Dividend cover: Headline earnings divided by dividends declared (excluding special dividends).(3) Gearing ratio: Interest-bearing loans and borrowings as a percentage of equity attributable to equity holders of the parent.(4) Current ratio: Current assets divided by current liabilities.(5) Acid test ratio: Current assets, less inventory, divided by current liabilities.



financial ratios (continued)stock exchange performanceMarket capitalisation+ (Rm’s) 7 5 147 4 094 3 316 2 109 2 516 5 147 3 391Closing share price at year end (cents) 5 560 445 360 265 317 645 427Market value per share– High (cents) 570 465 465 330 727 727 475– Low (cents) 410 340 260 220 250 414 302Closing share price to net asset value per share 2,57 2,39 2,88 1,57 2,13 5,27 4,28Price-earnings ratio (times) 13,63 12,75 10,90 8,20 9,16 19,06 14,57Dividend yield (%) 2,5 2,7 3,0 4,2 3,8 1,8 2,3Earnings yield (%) 7,3 7,8 9,2 12,2 10,9 5,2 6,9Number of shares in issue (millions) (excluding treasury shares) 919 920 921 796 794 797 796Volume of shares traded (millions) 25 34 32 38 58 37 23Value of shares traded (R000’s) 115 085 128 853 111 034 103 082 227 713 190 352 94 921Volume of shares traded as a % of total issued shares 2,4 3,2 3,4 4,8 7,3 4,6 2,9

+Excluding treasury shares.

Our focus in the year ahead is to leverage

growth opportunities within the existing

supply chain and store network – this

will demand intensified emphasis on

innovation, technology, training and

service.

Corporate governance



overview

Italtile is committed to applying, in all material respects,

with the principles contained in the King Report on

Governance for South Africa (“King III Code”), which

became effective on 1 March 2010, as well as to the

additional requirements for good corporate governance

stipulated in the JSE SRI index.

King iii

The JSE Listings Requirements require all JSE-listed

companies to provide a narrative of how they have

applied the new recommendations contained in King III,

in respect of financial years commencing on or after the

effective date.

During the year, the Group continued to advance its

progress made in respect of applying the King III Code

and the principles of integrated reporting. Ongoing

measurement and reviews were conducted comparing

the Group’s governance practices with those

recommended in King III, in order to ensure continued

improvements were made related to complying with the

implications of King III. The following areas were

scrutinised:

c The Board and Board committees’ structures;

c Key risk areas under intensive formal oversight;

c Strategic management of sustainability and

stakeholder considerations, including the integrated

annual report.

overall application and compliance with King iii

Italtile accepts the obligation to apply the practices

prescribed by the King III report and has resolved as a

business philosophy to adopt and pursue the same. It

therefore strives to meet those objectives in accordance

with the content of the table below:

In reading the table below, the numbers 1 to 3 have the

following meaning ascribed to them:

1 – Not applied/will not be applied.

2 – In process/partially applied.

3 – Full application.

Corporate governance continued

stage of maturity comments

principle per King iii

Ethical leadership and corporate citizenship 3 Applied

Effective leadership based on an ethical foundation 3 Applied

Responsible corporate citizen 3 Applied

Effective management of the Group’s ethics 3 Applied

Board and directors

The Board is the focal point for and custodian of corporate governance 3 Applied

Strategy, risk, performance and sustainability are inseparable 3 Applied

The Board and its directors should act in the best interests of the Group 3 Applied

Elect a Chairman of the Board who is an independent non-executive director 2 Note 1

The Board comprises a balance of power, with a majority of non-executive directors 3 Applied

Directors should be appointed through a formal process 3 Applied

Formal induction and ongoing training and development of directors should be conducted through formal processes 3 Applied

The Board is assisted by a competent, suitably qualified and experienced Company Secretary 3 Applied

Remuneration of each individual director and certain senior executives is disclosed 3 Applied

The Group’s remuneration policy is approved by Italtile shareholders 3 Applied

audit committees

Effective and independent Audit Committee 3 Applied

Chaired by an independent non-executive director 3 Applied

Responsible for overseeing of internal audit 3 Applied

Integral component of the risk management process 3 Applied

Oversees the external audit process 3 Applied

Reports to the Board and shareholders on how it discharged its duties 3 Applied

the governance of risk

The Board is responsible for the governance of risk and setting levels of risk tolerance 3 Applied

The Audit and Risk Committee assist the Board in carrying out its risk responsibilities 3 Applied

The Board ensures that risk assessments and monitoring are performed on a continual basis 3 Applied

Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks 3 Applied

Management implements appropriate risk responses 3 Applied

Sufficient risk disclosure to stakeholders 3 Applied



stage of maturity comments

the governance of information technology

The Board is responsible for information technology (IT) governance 3 Applied

IT is aligned with the performance and sustainability objectives of the Group 3 Applied

The Board should delegate to management the responsibility for the implementation of an IT governance framework 2

Partially applied

IT assets are managed effectively 3 Applied

The Audit and Risk Committee assists the Board in carrying out its IT responsibilities. 3 Applied

compliance with laws, codes, rules and standards

The Board ensures that the Group complies with relevant laws 3 Applied

The Board and directors have a working understanding of the relevance and implications of non-compliance 3 Applied

Compliance risk forms an integral part of the Group’s risk management process 3 Applied

internal audit function note 2

Effective risk-based internal audit function 3 Applied

Internal audit should follow a risk-based approach to its plan 3 Applied

Written assessment of the effectiveness of the Group’s system of internal control and risk management 3 Applied

Internal audit is strategically positioned to achieve its objectives 3 Applied

Governing stakeholder relationships

Appreciation that stakeholders’ perceptions affect a company’s reputation 3 Applied

Management to proactively deal with stakeholder relationships 3 Applied

There is an appropriate balance between its various stakeholder groupings, in the best interests of the Group 3 Applied

Equitable treatment of shareholders 3 Applied

Transparent and effective communication to stakeholders 3 Applied

integrated reporting and disclosure

The Audit and Risk Committee ensures the integrity of the Group’s integrated annual report 3 Applied

Sustainability reporting and disclosure is integrated with the Group’s financial reporting 3 Applied

note 1:

Following the untimely death of the Italtile Group’s Chief Executive Officer, Mr G P E Ravazzotti, Mr G A M Ravazzotti, formerly Non-executive Chairman, assumed the role of Executive Chairman tasked with all management functions and the day to day affairs of the business. The Board is aware that the appointment of an Executive Chairman could result in actual or perceived conflicts of interest and in order to mitigate any such conflicts of interest and having regard to the recommendations set out in King III, S M du Toit was appointed as lead independent non-executive director to the Board (refer to paragraph on lead independent director on page 47).

note 2:

The internal audit function is an integral part of the Group finance function.


Board of directors

A formal Board charter, as recommended by the King Codes, has

been adopted. The charter 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, an executive

chairman and four non-executive directors of which three 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:

c Executive directors are employed in a full-time capacity by

Italtile;

c Non-executive directors are those who, while not in the full-time

employment of the Group, are members of the Management

Committee or who have been nominated by a shareholder

owning more than 20% of the Group; and

c Independent non-executive directors are all other directors

irrespective of the period during which they have been members

of the Board.

No director has an automatic right to a position on the Board. All

directors are required to be elected by the shareholders at an

annual general meeting on a rotational basis.

Board responsibilities

The Board is responsible to shareholders for the conduct of the

business of the Italtile Group, which includes providing Italtile with

clear strategic direction. The schedule of matters reviewed by the

Board includes:

c Approval of the Group’s strategy and annual budget;

c Overseeing Group operational performance and management;

c Ensuring that there is adequate succession planning at senior

levels;

c Overseeing director selection, orientation and evaluation;

c Approval of major capital expenditure or disposals, material

contracts, material acquisitions and developments;

c Reviewing the terms of reference of Board committees;

c Determining policies and processes which seek to ensure the

integrity of the Group’s risk management and internal controls;

c Maintaining and monitoring the Group’s systems of internal

control and risk management;

c Communication with shareholders, including approval of all

circulars, prospectuses and major public announcements;

c Approval of the interim statement and integrated annual report

and accounts (including the review of critical accounting

policies and accounting judgements and an assessment of the

Company’s position and prospects); and

c 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.

The division of responsibilities maintains a balance of power and

authority on the Board.

term of office

The three executive directors have a fixed term of employment. In

accordance with the Company’s Memorandum of Incorporation,

all 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 annual general meeting held immediately after

his or her appointment.

Board meetings

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 which 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 memberattendance at meetings

in 2012

G A M Ravazzotti# 5/5P D Swatton# 5/5P Langenhoven# 3/5S M du Toit 5/5S I Gama 4/5A Zannoni 4/5S G Pretorius 5/5

#Executive

Board appointment policy

The Board evaluates its composition each year to ensure an

appropriate mix of skills, experience, 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 annual general meeting of shareholders.

None of the directors have entered into service contracts or

standard letters of appointment with Italtile.

lead independent director

King II emphasised that there should be a clear division of

responsibilities at the head of the Company, ensuring a balance of

power and authority, so that no one individual has “unfettered

powers of decision-making” (Code 2.3.1). This points strongly to

having an independent non-executive chairman.

However, King III recognises that a company may have sound

reasons for appointing a chairman who does not meet all the

criteria for independence, but should be prepared to justify its

decision. In such circumstances, King III as well as the JSE

Listings Requirements advocate that the appointment of a lead

independent director (“LID”) can assist the Board in dealing with

any actual or perceived conflicts of interest that arise in these or

future circumstances.

Per King III, the main function of an LID is to provide leadership

and advice to the Board, without detracting from the authority of

the chairman, when the chairman has a conflict of interest. The

LID should at all times be aware that his/her role is that of support

to the chairman and Board and not in any way to undermine the

authority of the chairman. The LID should also chair those Board

meetings which deal with the succession of the chairman and the

chairman’s performance appraisal.

Having regard to these recommendations set out in King II and

King III, S M du Toit serves as lead independent non-executive

director to the Company’s Board.

Board committees

The Board has established three committees to which it has

delegated specific responsibilities in meeting its corporate

governance and fiduciary duties. These committees operate

within written terms of reference approved by the Board.

These are:

c Audit and Risk Committee;

c Remuneration and Nominations Committee; and

c Social and Ethics Committee.

audit and risk committeeaccounting and internal controls

The Board has established controls and procedures to ensure the

accuracy and integrity of the accounting records and to provide

reasonable assurance that assets are safeguarded from loss or

unauthorised use and that the financial statements may be relied

upon for maintaining accountability for assets and liabilities and

preparing the financial statements.

Management monitors the operation of the internal control

systems in order to determine if there are deficiencies. Corrective

action is taken to address control deficiencies as they are

identified. The Board, operating through the Audit and Risk

Committee, oversees the financial reporting process and internal

controls systems. The Group applies the principles of integrated

reporting.

The report of the Audit and Risk Committee is on page 57 of this

document.

remuneration and nominations committeecomposition and terms of engagement

The Remuneration and Nominations Committee complies with

the King III Code of Governance Principles. The Committee meets

at least twice per annum. The Committee is chaired by an

independent non-executive director and is comprised of three

directors. The current members of the Committee are:

c S M du Toit (Chairman) – Independent non-executive

director;

c G A M Ravazzotti – Executive Chairman; and

c P D Swatton – Executive director.

The Board considers the Committee’s composition to be

appropriate in terms of the necessary knowledge, skills and

experience of its members.

The Company Secretary, E J Willis, attends all meetings of the

Committee as secretary.


performance management

For executives and senior management, performance is linked to

strategic delivery and defined financial targets set each year.

policy on annual incentive schemes

All employees share in Group profits, based on the individual’s

contribution to the Group.

policy on long-term incentives

There are two long-term incentive schemes within the Italtile

Group, each rewarding performance in an appropriate manner,

designed to reward and retain key personnel. The long-term

incentives include The Italtile Long-Term Incentive Plan as well as

the Share Appreciation Scheme.

Long-Term Incentive Plan

In accordance with the Long-Term Incentive Plan (“LTIP”),

selected directors and employees of the Group are entitled to

receive conditional notional Italtile Limited share awards. 25% of

the awards vest after three years from grant date, and the balance

(75%) after five years. There is no strike price attached to these

awards, and the exercise price is defined as the volume weighted

average price of Italtile Limited shares as traded on the JSE over

the 10 trading days preceding and including the vesting date.

Share Appreciation Rights Scheme

In accordance with the Share Appreciation Rights Scheme

(“SARS”), selected directors and employees of the Group are

entitled to a conditional cash award linked to the value of notional

Italtile Limited shares. 25% of the awards vest after three years

from grant date, and the balance (75%) after five years. The value

of an award is equal to the increase in the value of the shares

between grant date and vesting date (the value at the latter date

is defined as the volume weighted average price of Italtile Limited

shares as traded on the JSE over the 10 trading days preceding

and including the vesting date).

Awards from both schemes are to be applied towards the

obligatory subscription and/or purchase of Italtile Limited ordinary

shares.

Business partners have the opportunity to earn dividends through

their non-controlling shareholding in the respective joint-venture

businesses.

No attendee may participate in any discussion or decision

regarding his or her own remuneration.

The Committee met twice during the year. Attendance at the

meetings was as follows:

Members attendance at meetings in 2012

S M du Toit 2/2G A M Ravazzotti 2/2P D Swatton 2/2

role and responsibilities

The Committee chairman reports formally to the board on its

proceedings after each meeting of the Committee and attends

the annual general meeting to respond to any questions from

shareholders regarding the Committee’s area of responsibility.

The Committee operates within the written terms of reference

confirmed by the Board, which includes:

c Assisting the Board in setting the Group’s Remuneration Policy;

c Advising on the fees for non-executive directors;

c Determining the total remuneration of the Executive Directors

and Executive Management;

c Reviewing and recommending short- and long-term incentive

policies for directors, executive management and staff;

c Identifying fit and proper candidates who could be

recommended for appointment to the Board, and evaluating

them against the specific disciplines and expertise required.

The Committee reviews and evaluates the contribution of each

director and member of senior management and determines their

salary adjustments on an annual basis.

The Committee reviews remuneration and Board best practice

reviews and obtains market information and remuneration trends

from consulting with independent advisers in order to fulfil its

responsibilities. These include, among others, Ernst & Young and

PricewaterhouseCoopers.

Details of directors’ remuneration are set out on page 62 and 63

of this report.

remuneration policy

Italtile is committed to maintain pay levels that reflect an

individual’s worth to the Group. The Group’s philosophy is to treat

employees as business partners. Remuneration policies are

designed to attract, reward and retain the executives and

employees needed to deliver on Italtile’s business strategy.



social and ethics committee

In compliance with the new Companies Act, the Group established

a Social and Ethics Committee, constituted by the Board on

14 February 2012. The Committee held its first meeting on

22 May 2012 and plans to meet twice annually.

The recommendation of the Remuneration and Nominations

Committee was that the composition of the Committee comprise:

S M du Toit, G A M Ravazzotti and P D Swatton, with the

Committee chaired by S M du Toit. An advisory panel comprising

individuals within the Group will work alongside the Committee in

achieving the objectives agreed upon by the Committee.

The Committee operates within the written terms of reference

confirmed by the Board. A work plan was developed in line with

the requirements of the Companies Act and the principles of the

King Code, which includes:

c Monitoring the Group’s activities with regard to matters

relating to:

– social and economic development;

– good corporate citizenship, including the Group’s promotion

of equality, prevention of unfair discrimination, prevention of

corruption, contribution to development of the communities

in which its activities are predominantly conducted or within

which its products or services are predominantly marketed,

and record of sponsorship, donations and charitable giving;

– the environment, health and public safety, including the

impact of the Group’s activities and of its products or

services;

– consumer relationships, including the Group’s advertising,

public relations and compliance with consumer protection

laws; and

– labour and employment.

c Monitoring the Group’s performance and interaction with its

stakeholders and ensuring that this interaction is guided by the

Constitution and Bill of Rights;

c Determining clearly articulated ethical standards and ensuring

that the Group takes measures to achieve adherence to these

in all aspects of the business, thus achieving a sustainable

ethical corporate culture within the Group;

c Providing effective leadership based on an ethical foundation

and ensuring that the Group is and is seen to be a responsible

corporate citizen.

non-executive directors’ fees

The Remuneration Committee takes cognisance of market norms

and practices, as well as the additional responsibilities placed on

Board members by new legislation and corporate governance

rules.

Non-executive director remuneration consists of an annual

retainer and a meeting attendance fee. The fees are market

related and not linked to the share price of Italtile Limited.

Italtile Limited non-executive directors do not receive bonuses or

share options to ensure actual and perceived independence.

However, it should be noted that S I Gama participates in the

Group’s BEE transaction.

Subsequent to year end the Board has decided to split the roles

of the Remuneration and Nominations Committee. Composition

of these Committees is disclosed on page 55.

company secretary

The Company Secretary is E J Willis.

The Company Secretary is required to provide the members of

the Board with guidance and advice regarding their responsibilities,

duties and powers and to ensure that the Board is aware of all

legislation relevant to or affecting the affairs of the Company. The

Company Secretary is required to ensure that the Company

complies with all applicable legislation regarding the affairs of the

Company, including the necessary recording of meetings of the

Board, Board Committees and shareholders of the Company and

ensuring that proper procedures are followed in all Board matters.

It requires a decision of the Board as a whole to remove the

Company Secretary, should this become necessary.

All directors have unlimited access to the services of the

Company Secretary.

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 to 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.

The Code will be evaluated on a regular basis to ensure it aligns

with the corporate compliance policy, King III and relevant new

legislation.


risk management and internal controls

Italtile Limited 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 auditors (Ernst & Young Inc.); and head office 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

non-financial 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 Material Issues report on page 9 of this report discusses the

Group’s key risks and issues and the management thereof in

detail. In brief they are identified as follows:

suppliers and supply chain management

The Group has strong relationships with its supply partners, being

the largest customer to all of its suppliers. Opportunities to

increase capacity by suppliers if required is constantly reviewed,

as are alternative sources of supply should any potential disruption

be identified. The Group’s proposed acquisition of a strategic

stake in Ceramic Industries is evidence of its policy to strengthen

key supplier relationships.

remaining competitive/fashionable

Ensuring that the Group remains fashionable and internationally

competitive is critical to its continued existence. Staying abreast

of fashion trends and evolving consumer behaviour, employing

experienced brand managers and capitalising on leading-edge

technology are key priorities in this regard.

social and ethics committee meetings

Board Member attendance at meetings in 2012

G A M Ravazzotti 1/1S M du Toit 1/1P D Swatton 1/1

stakeholder communication

Italtile Limited 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 annual general meeting provides an opportunity to

communicate directly with shareholders. The Chairman has the

opportunity to present to the shareholders a report on current

operations and developments. The meeting also 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 annual general meeting and related documents are

mailed to shareholders at least 21 working days before the

meeting. Separate resolutions are proposed on each substantially

different issue. The notice is contained in the integrated annual

report.

The Group’s executive management team meets with investors

after the publication of interim and annual results to present an

update on the industry, current operations of the business and its

prospects.

share dealings

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 Securities Services Act, 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.

This principle is also applied at other times whenever there is a

corporate action or similar circumstance.



Brand reputation

Reputational risk is managed by ensuring intensive focus on

customer service, product quality and realistic pricing. Staff

training, motivation and incentivisation are key activities in

promoting positive brand awareness. Italtile’s corporate

governance, sustainability and environmental policies all contribute

to upholding the Group’s brand reputation.

preservation of the organisational philosophy and structure

Central to the Group’s success is its business model which

promotes partnerships and autonomy (an effective motivator),

and has been flexible and adaptable in the past. The Group would

be negatively impacted if this philosophy and structure are not

adequately preserved. A range of factors mitigate this risk,

including: close involvement in the operations of the Group by

divisional management and executive directors which serves to

reinforce the values of the Group; flat reporting structures which

facilitate transparent communication and oversight; and optimal

recruitment and training programmes to ensure the business

model is entrenched.

treasury risk

The Group has in place a Treasury policy, which serves to mitigate

against risks including: under-performing investment returns;

inadequate liquidity of investments to meet commitments; and

institutional/commercial risk relating to funds into which

investments are made.

currency risk

Foreign currency exposure in imported product is actively

managed. All foreign liabilities are matched with forward exchange

contracts upon confirmation of import orders.

credit risk

Trade credit is available through the Italtile and CTM divisions.

Strict credit granting criteria are in place and the trade debtors’

book is insured through a reputable insurance company. The

Board is confident that an adequate system of internal control is

in place, which mitigates areas of significant risk to an acceptable

level.

recruitment, retention and succession planning

Attracting, developing and retaining human capital is a major

focus for the Group. Keen attention is paid to optimal recruitment

processes, comprehensive training, and motivation and

incentivisation of employees.

Ongoing development of leadership and management potential is

a critical initiative advanced through high-level training

programmes.

computer-based business process

All major business processes are computerised and the Group

has a formally documented and tested disaster recovery plan in

place.

regulatory compliance

In order to mitigate against the risk of non-compliance with

relevant legislation and regulations, the Group regularly engages

various professionals and legal advisers. In addition, management

attends workshops and training related to legislative and other

updates. To an extent, the external audit also provides some

assurance related to compliance.

sustainability

Italtile Limited 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.

Shareholders, customers, employees, suppliers, regulators and

the communities in which the Group operates are regarded as key

stakeholders.

King III places renewed emphasis on the principles of strategy,

sustainability and governance discussed in King II, but provides

for greater integration of those elements. Accordingly, Italtile

continues to strive to align the Group’s practices with the

recommendations of the King Report.

transformation

Italtile Limited 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 Human Resources policies accordingly.


employment equityemployee composition statistics

As at 30 June 2012

Male femaleAfrican Coloured Indian White African Coloured Indian White total

Total Permanent 255 25 10 100 87 18 7 55 557Non-Permanent 13 1 1 4 1 — — 3 23

total 268 26 11 104 88 18 7 58 580

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 consistently met relevant targets

over recent years.

corporate social responsibility

The Group is committed to uplifting the societies in which it

operates through following sound employment practices and

meeting the real needs of those communities.

Italtile continues to invest in South Africa and neighbouring

countries in education, training and skills transfer through the

Italtile training academy which has provided tiling, technical and

business skills to numerous previously unemployed individuals.

In acknowledgement of the vital contribution the National Sea

Rescue Institute (NSRI) makes to the people of South Africa,

Italtile donated R1,8 million for the construction of a new NSRI

Station (14) in Plettenberg Bay, comprising upgraded training,

radio and operating facilities.

In a further venture to raise funds for the NSRI, seven Italtile

employees and two NSRI members – one each from Plettenberg

Bay and Knysna – undertook the 5 898 metre climb to the summit

of Mount Kilimanjaro in January this year. Donors pledged support

for each metre of the climb achieved, raising a total of R873 000.

These funds have been utilised by the NSRI to acquire additional

sea rescue equipment and to renovate the NSRI Knysna station.

Ad hoc contributions were also made to the following deserving

causes:

c R514 000 to Sparrow Ministries Aids Village, a non-profit

organisation which provides care and comfort to adults and

children who have been infected or affected by the HIV/Aids

pandemic.

c One School at a Time.

c Little Eden.

c World Wildlife Fund (upgraded from Senior to Principal

Member).

c South African Guide Dogs Association.

c Sanpark Honorary Rangers.

In addition, a number of Group-owned, joint-venture and

franchised stores across the Group make ongoing corporate

social investments to various community causes.

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. The aim of the Group’s Health and

Safety policy is to prevent and minimise work-related and health

impairments by ensuring that all employees are provided with

adequate training and supervision to undertake their roles.

environmental management

The Group’s environmental department is instrumental in

implementing 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 department

operates in conjunction with the property portfolio department,

with a view to better aligning and integrating the Green agenda

into the day-to-day processes and functioning of the business.

Successful initiatives implemented over the past year include

implementation of energy- and water consumption efficiencies in

all new stores, recycling programmes across established stores,

and the introduction of an accreditation rating of all products and

packaging used by the Group.

These initiatives will enhance the quality of the business

over the long term by reducing overheads and improving

efficiencies while simultaneously promoting the sustainability of

the environment.

The Group’s Green agenda is discussed in greater detail on

page 13 and 33 of this report.



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

South Africa’s diverse population base, and to ensure they are

empowered, accountable for their actions and rewarded

accordingly.

The Group’s goal is:

c to match the demographics of the organisation with the diverse

markets in which it operates. To achieve this, a representative

team is tasked with managing the employment equity plan and

ensuring that milestones are achieved;

c to employ a range of mechanisms to promote worker

participation in the operational decision-making process;

c to continue to implement the profit incentive scheme instituted

in 1990, whereby all members of staff share in the Group’s

trading profits;

c to cultivate entrepreneurship within the Group by ensuring

trading operations are franchised or in partnerships with the

Group; and

c to evaluate and evolve training initiatives continuously to

improve the skills level in the organisation.

skills development

Training and development initiatives are formulated and conducted

in-house, ensuring relevance to the Group’s culture, values and

strategy.

Some 23 training modules are available to staff across the

country. 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. Minimum training competencies have

been mapped for all job titles to support consistent standards

across the Group.

Over the past year over R5 million was spent on training and staff

communications, and a further R1,2 million was incurred in

course development. 919 staff members completed courses in

the review period.

In addition to Group-wide training interventions, Italtile’s Tiling,

Plumbing and Laminate Academy, launched in November 2009,

has raised the benchmark in product knowledge training. Since

inception, 73% (2011: 40%) of the Group’s employees have

graduated from this institution.

economic impacts

Italtile Limited 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.


Value added stateMent

Group

2012 2011rm’s % Rm’s %

turnover 1 845 1 521Cost of goods and services (1 036) (820)

809 701income from investments and interest received 46 37Value added 855 738

Value distributed and retainedEmployees– Salaries, incentives and benefits 140 16 123 17Providers of capital 136 16 119 16

– Outside equity holders 17 2 18 2– Ordinary dividend 119 14 101 14

Taxation 155 18 130 18Reinvested in Group activities 424 50 366 49

– Depreciation 46 5 45 6– Retained income 378 45 321 43

855 100 738 100

Value distributed and retained 2012

Employees

Providers of capital

Taxation

Reinvested in Group activities

16%

16%

18%

50%

Value distributed and retained 2011

17%

16%

18%

49%

indirect iMpacts

The total economic impact of an organisation includes indirect impacts. These are usually benefits arising in the course of its business to which

a monetary amount is not directly attributable. Italtile Limited does not assess and quantify its indirect economic impacts although the Group

does provide indirect economic benefits:

c The Group spent R1 036 million during the year purchasing tiles and sanitaryware as well as other products and services from suppliers. This

in turn creates opportunities for suppliers to employ more staff to keep pace with the Group’s demands.

c During the year the Group paid R155 million in taxation, for the ultimate benefit of all South Africans.

c The Group paid R140 million during the year to employees in the form of salaries, incentives and benefits. These employees in turn supported

their families, contributing to the economic activity of their communities and the South African economy.



Directorate and administration

directors

Giovanni Ravazzotti (69)

Group Executive Chairman

Founder, in 1969, of the Italtile Group and Chairman of Ceramic

Industries Limited.

Peter Swatton (54) – British

BCompt (Hons), CA(SA)

Chief Financial Officer

Joined the Company in 1988. Appointed to the Board in 1992.

Peter was appointed Chief Financial Officer in February 1992.

He has had 24 years service with the Italtile Group during which

time he was Chief Executive Officer for two and a half years.

Susan du Toit (39)

CA(SA), MCom (Financial Management)

Lead Independent Non-executive Director

Appointed to the Board in 2009.

Susan is a Chartered Accountant (SA) and has held a number of

positions within Ernst & Young culminating in the position as Lead

Audit Partner on a number of entities listed on the JSE. Susan

also held the position of Team Leader for a group of audit partners

at Ernst & Young.

Siyabonga Gama (45)

BCom (Hons), AEP, CAIB(SA)

Non-executive Director


Siyabonga is a past Chief Executive Officer of the National Ports

Authority of South Africa, past Chairman of the Port Management

Association of Eastern and Southern Africa, is Honourary Lifetime

President of the Union of African Railways and is the Chief

Executive Officer of Transnet Freight Rail.

Pierre Langenhoven (43) – Australian

Executive Director

Appointed to the Board in June 2011.

Pierre Langenhoven joined the Italtile Group in 1990 in

Johannesburg. He started in sales at CTM and over the years has

been promoted to each level within the division, around South

Africa. Pierre was transferred to Australia in 2000, and has been

the Managing Director of Italtile Australia since 2002. His

strengths lie in all aspects of retail operations and management.

He brings 22 years of experience to his Board appointment.

Brand Pretorius (64)

MCom Business Economics from the University of the

Orange Free State


Appointed to the Board in June 2011.

Brand Pretorius is a well-known and respected businessman in

South Africa, particularly in the motor industry where he held the

position of managing director for Toyota SA Marketing for eight

years and that of Chief Executive Officer of McCarthy Limited from

1999 to his retirement on 1 March 2011. It is widely acknowledged

that Brand played the pivotal role in saving McCarthy from

bankruptcy. Brand currently serves as a non-executive director on

the boards of the Absa Group, Absa Bank Limited, Reunert,

RGT Smart and Tongaat Hulett.

Alessia Zannoni (37)



Alessia, an Italian resident, started her career in advertising

and communication in 1998. Following her qualification in

communication and design at Instituto Superiore di Comunicazione

in Milan, Ms Zannoni worked as art director at several advertising

agencies, after which she started an advertising and web agency

in Modena, Italy. Ms Zannoni currently works as a freelance

creative director, image and branding consultant.

audit and risK coMMittee

S M du Toit (Chairman)

S I Gama

S G Pretorius

P D Swatton*

*By invitation.

reMuneration coMMittee


G A M Ravazzotti

P D Swatton

noMinations coMMittee

S G Pretorius (Chairman)

S M du Toit

S I Gama

social and ethics coMMittee


G A M Ravazzotti

P D Swatton

Directors’ approval


The directors are responsible for both the preparation and

integrity of the financial statements and related financial

information contained in the annual report. In their opinion, the

financial statements fairly represent the Group’s financial position

and results of operations. It is the responsibility of the independent

auditors to report on the financial statements. Their report to the

members of the Company is set out on page 60.

In order for the directors to discharge their responsibility, the

Group maintains adequate accounting systems, risk control

procedures and accounting records. A system of internal control,

focused on critical risk areas and designed to provide reasonable

assurance that assets are safeguarded, and that the risk of error,

fraud or loss is reduced in a cost-effective manner, has been

implemented. All controls are frequently monitored and subject to

review and audit. There was no material breakdown in the system

of internal control during the year under review.

The Group adopts appropriate accounting policies and the annual

financial statements are prepared in accordance with International

Financial Reporting Standards and the AC 500 standards as

issued by the Financial Reporting Standards Council. The financial

statements incorporate full and meaningful disclosure, and have

been prepared using reasonable and proven judgements and

estimates.

The financial statements have been prepared under the

supervision of the Chief Financial Officer, Mr P D Swatton CA(SA).

GoinG concern

The directors are of the opinion that the business will continue as

a going concern in the year ahead. The annual financial statements

have accordingly been prepared on a going-concern basis.

code of ethics

The directors have complied with the Group’s code of ethics.

approVal of annual financial stateMents

The annual financial statements of the Company and the Group

set out in pages 60 to 100 were approved by the Board of

Directors on 20 September 2012 and signed on its behalf by:

G a M ravazzotti

Chairman

p d swatton

Chief Financial Officer

coMpanY secretarY’s approVal

In terms of the Companies Act No 71 of 2008, I certify that the

Company has lodged, with the Registrar of Companies, all such

returns as are required of a public company in terms of the Act,

and that all such returns are true, correct and up to date.

e J Willis

Company Secretary

20 September 2012


Audit and Risk Committee report

audit and risK coMMittee report

The Audit and Risk Committee submits this report in terms of the Companies Act No 71 of 2008 (“Companies Act”).

A formal Audit and Risk Committee Charter, approved by the Board, guides the Committee in terms of its objectives, authority and responsibilities. The Charter is reviewed annually and, if necessary, amended to meet market, regulatory and statutory requirements.

The Committee consists of three independent non-executive directors, namely S M du Toit (Chairman), and S I Gama and S G Pretorius.

The Committee meets at least three times a year. The Chief Financial Officer, Group financial manager, external audit partner, internal audit representative and the head of information technology attend meetings by invitation. The Company Secretary, E J Willis, attends and minutes all meetings of the Audit and Risk Committee.

committee member

attendance at meetings

in 2012

S M du Toit 5/5S I Gama 5/5S G Pretorius 5/5

The role of the Committee is inter alia to:

c review the effectiveness of the Group’s systems of internal control, including internal financial control and risk management, and to ensure that effective internal control systems are maintained;

c oversee the risk management process;

c review financial statements for proper and complete disclosure of timely, reliable and consistent information and to confirm that the accounting policies used are appropriate;

c deal with concerns and complaints relating to accounting policies, internal audit, the audit or content of the integrated annual report and internal financial controls;

c nominate the appointment of the external auditors as the registered independent auditor after satisfying itself through enquiry that the auditors are independent as defined in terms of the Companies Act;

c determine the fees to be paid to the external auditors and their terms of engagement;

c ensure that the appointment of the external auditor complies with the Companies Act and any other legislation relating to the appointment of auditors; and

c approve the scope of non-audit services which the external auditor may provide to the Group and preapprove any non-audit services to be provided by the external auditors.

risK ManaGeMent and co-ordination of assurance actiVities

The Committee oversees the risk management process. At least one Committee meeting a year is dedicated to the detailed review of the Group risk assessment including information technology risks. The Committee co-ordinates all assurance activities by means of the Group’s combined assurance model. The internal audit function is an integral part of the Group finance function. The Committee approves the internal audit plan and focus areas. Internal audit reports on findings of work performed to the Committee on a regular basis.

external auditors

During the year under review, the Committee, in consultation with executive management, approved the external audit plan and fee proposal and considered reports from the external auditors on the annual and interim financial statements. The Committee satisfied itself that Ernst & Young Inc. and D Engelbrecht, the designated auditor, are independent of the Company. The Chairman of the Committee has regular discussions and meetings with the external auditors, independently of management.

Whistle-BloWinG

An independent external whistle-blowing line was introduced during the year under review. Instances of whistle-blowing are reported to the Chairman of the Committee. There were no instances of whistle-blowing during the year under review.

expertise of chief financial officer

In accordance with the JSE Listings Requirements, the Committee must consider the appropriateness of the expertise and experience of the Chief Financial Officer of the Company on an annual basis. The Committee believes that P D Swatton, the Chief Financial Officer, possesses the appropriate expertise and experience to meet his responsibilities in that position.

Audit and Risk Committee report continued


recoMMendation of the inteGrated annual report

The Committee has noted the external auditors’ opinion and findings on the integrated annual report and has recommended the approval of the integrated annual report to the Board.

The Committee reports that it has discharged its responsibilities and duties in compliance with its Charter.

s M du toit

Audit and Risk Committee Chairman

20 September 2012

internal financial controls

Based on the results of work done by the internal audit function and external auditors on Italtile Group’s system of internal financial controls, and considering feedback and information from management, the Committee is of the opinion that the Italtile Group’s system of internal financial control was effective for the year under review and that it formed a reliable basis for the preparation of the Group financial statements.

financial stateMents

The Committee has reviewed the financial statements of the Company and the Italtile Group and is satisfied that they comply with International Financial Reporting Standards and that the accounting policies applied are appropriate.

sustainaBilitY reportinG

The Committee reviewed and considered the Group’s sustainability information as disclosed in the integrated annual report. The Committee discussed the sustainability information with management and is satisfied, based on information and explanations from management, that the sustainability information is reliable.


Independent auditors’ report to the shareholders of Italtile Limited

report on the financial stateMents

We have audited the accompanying consolidated financial

statements of Italtile Limited and its subsidiaries, which comprise

the directors’ report, consolidated and separate statements of

financial position as at 30 June 2012, the consolidated and

separate statements of comprehensive income, the consolidated

and separate statement of changes in equity and the consolidated

and separate statement of cash flows for the year then ended,

and the notes, comprising a summary of significant accounting

policies and other explanatory information, as set out on

pages 60 to 100.

directors’ responsiBilitY for the financial

stateMents

The Group’s directors are responsible for the preparation and fair

presentation of these consolidated and separate financial

statements in accordance with International Financial Reporting

Standards and the requirements of the Companies Act of South

Africa, and for such internal control as the directors determine is

necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error.

auditors’ responsiBilitY

Our responsibility is to express an opinion on these consolidated

and separate financial statements based on our audit. We

conducted our audit in accordance with International Standards

on Auditing. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the financial statements.

The procedures selected depend on the auditors’ judgement,

including the assessment of the risks of material misstatement of

the financial statements, whether due to fraud or error. In making

those risk assessments, the auditor considers internal control

relevant to the entity’s preparation and fair presentation of the

financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal

control. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

opinion

In our opinion, the consolidated and separate financial statements

present fairly, in all material respects, the consolidated and

separate financial position of Italtile Limited as at 30 June 2012,

and its consolidated and separate financial performance and cash

flows for the year then ended in accordance with International

Financial Reporting Standards and the requirements of the

Companies Act of South Africa.

other reports required BY the coMpanies act

As part of our audit of the consolidated and separate financial

statements for the year ended 30 June 2012, we have read the

Audit and Risk Committee’s Report and the Company Secretary’s

certification for the purpose of identifying whether there are

material inconsistencies between these reports and the audited

consolidated and separate financial statements. These reports

are the responsibility of the respective preparers. Based on

reading these reports we have not identified material

inconsistencies between these reports and the audited

consolidated and separate financial statements. However, we

have not audited these reports and accordingly do not express an

opinion on these reports.

ernst & Young inc.

Director: d engelbrecht

Registered Auditor (RA)

Chartered Accountant (SA)

20 September 2012


Directors’ report

principal actiVities of the coMpanY

retail

Italtile Limited (“Italtile”), headquartered in Bryanston,

Johannesburg, is the leading retailer of tiles, bathware and related

products in South Africa.

franchising

The Group operates as a national franchisor, featuring a

streamlined parent operation focused on growing market share

and fostering entrepreneurial opportunities through its franchise

programme.

The Group is represented via its high profile branded retail outlets,

Italtile, CTM and TopT, which cater to homeowners across the

income spectrum, holding appeal for market segments ranging

from the premium upper end to entry level consumers. These

stores are situated on high visibility sites and/or close to previously

under-serviced markets, and their comprehensive offerings

position them as one-stop solution destinations. Ranges include

ceramic and porcelain wall and floor tiles, sanitaryware, bathroom

furniture, taps, fittings, accessories, laminated wooden flooring,

décor and tools.

The store network comprises 112 stores, situated in South Africa,

the SADEC region and the east coast of Australia.

All three of the Group’s brands, TopT, CTM and Italtile are

franchised.

property investment

Underpinning the retail network is an extensive property portfolio.

The Group derives important strategic advantage by supporting

its brands with high profile prime sites that enhance Italtile’s

positioning as a destination retailer.

support services

The Group’s vertically integrated supply chain comprises

International Tap Distributors (“ITD”), an importer and distributor of

taps and accessories, and Cedar Point, an importer and

distributor of tiling tools, laminated boards, cabinets and decor.

The Group holds a controlling interest in both of these businesses.

ITD services the CTM and TopT retail network as well as the open

market, while Cedar Point’s offering is exclusive to CTM.

The Group’s Distribution Centre, located in Durban, sources

imported tiles for the CTM network and provides warehousing

and distribution facilities to CTM, Italtile and TopT. It is also

responsible for arranging logistics and foreign exchange for the

Group’s retail brands as well as ITD and Cedar Point.

stateMents of responsiBilitY

The responsibilities of the Group’s directors are detailed on

page 46 of this report.

audit and risK coMMittee

The Audit and Risk Committee report is on page 57. Page 47 of

the Corporate Governance report also discusses the

responsibilities of this Committee and how these were discharged

during the year.

financial reVieW

system-wide turnover

Like-on-like system-wide turnover across the Group increased

16% to R3,52 billion (2011: R3,02 billion). Growth was recorded

by all three retail brands. With new stores not contributing

materially to revenue in the review period, this growth was largely

organic and attributable to enhanced efficiencies in the business

and supply chain, as well as a gain in market share.

normalised profit and trading operations

Normalised reported trading profit grew 17% to R523 million

(2011: R448 million). In the current competitive environment the

Group restricted average selling price increases across the board

and passed on cost savings derived from the strong rand to its

consumers. This strategy had the effect of containing margins at

previous levels.

property, plant and equipment

During the reporting period further investment of R124 million was

made in the Group’s property portfolio, increasing the carrying

value to R1,062 million (2011: R924 million). There has been no

change in the nature or use of property, plant and equipment over

the past year.

Business combination

In March 2012 the Group elected to convert interest-bearing

amounts advanced to an Australian property holding company,

Melkbos (Pty) Limited, to equity. The decision to capitalise the

loans is consistent with the Group’s policy on property investment

and resulted in the Group acquiring an 83% interest in the

company for a net cash outflow of R36 million.

From the effective date of the business combination the company

has made a negligible contribution to Group earnings.


cash and cash equivalents

Notwithstanding capital expenditure of R170 million, cash

reserves increased to R917 million, a 9% improvement on the

prior year (2011: R839 million) reflecting prudent capital

management and the strong cash generating ability of the trading

operations.

The Group will maintain its policy of utilising cash reserves

for dividend payments and to fund operations, store

refurbishments and store relocations.

long-term liabilities

In terms of interest-bearing debt, the Group’s exposure includes

borrowings of R300 million (2011: R300 million) to fund

opportunistic investments in South Africa and R41 million (2011:

R31 million) loan finance utilised in the acquisition of fixed property

in Australia.

future prospects

Management is satisfied that the South African business should

continue to grow at current rates in the forthcoming period given

the capacity in the local market to increase consumption of the

Group’s merchandise. Robust growth targets have thus been set

for this operation. In contrast, expectations for the Australian

market are more restrained.

Continued focus on innovative trading and overhead containment

will remain key to the Group’s goal to achieve an optimal balance

of customer satisfaction and profitability.

In the short term, instability in European markets presents

opportunities to source high quality fashionable product at

affordable prices, and the Group will leverage this potential.

The Group will also continue to invest in technology to ensure that

its offering remains top of mind and within easy access of

consumers.

stated capital

The authorised and issued share capital remains unchanged at

3 300 000 000 shares of no par value. Issued share capital is

1 033 332 822 (2011: 1 033 332 822) shares of no par value.

diVidends

A final dividend number 92 of 7 cents per share (2011: 6 cents

per share) for the year ended 30 June 2012 was declared by the

Board of Directors. Together with the interim dividend number 91

of 7 cents per share (2011: 6 cents per share) this amounts to a

total ordinary dividend of 14 cents per share (2011: 12 cents per

share), an increase of 17%.

Italtile has a strong statement of financial position and remains

cash generative. Management is satisfied that current cash

reserves coupled with projected net cash inflows are in excess of

operating requirements and planned capital expenditure.

The dividend cover will remain at three times.

The salient dates for the final dividend were:

Last day to trade cum dividend Friday, 24 August 2012First day to trade ex dividend Monday, 27 August 2012Record date Friday, 31 August 2012Dividend payment date Monday, 3 September 2012

directors and officers

The details of the directors of the Company are set out on

page 55.

In accordance with the Company’s Memorandum of Incorporation,

S I Gama and A Zannoni retire by rotation, and being eligible, offer

themselves for re-election at the forthcoming annual general

meeting.

directors’ shareholdinG and other interests

Except for the share option scheme and share incentive plans

detailed below, the Company was not party to any arrangement

during the year or at year end, which would enable the directors

or officers, or their families, to acquire benefits by means of

acquisition of shares in the Company.

Other than disclosed in note 34, none of the directors or officers

of the Company had any interest in any contracts which

significantly affected the affairs or business of the Company or its

subsidiaries during the year.

It is Company policy that all directors and employees who have

access to price-sensitive information may not deal directly or

indirectly in the shares of the Company from the end of a

reporting period until publication of the interim results or annual

profit announcement.

The directors’ beneficial and non-beneficial interest in the stated

share capital of the Company at the reporting date is set out in

the table on page 62. There has been no change of interests

between 30 June 2012 and the date of this integrated annual

report.

Directors’ report continued


at 30 June 2012director direct

Beneficial indirect total % held direct

non-beneficial

indirect total % held

G A M Ravazzotti 14 637 088 345 980 215 360 617 303 34,90 — — — —P D Swatton 12 896 400 — 12 896 400 1,25 — — — —S I Gama# 200 000 — 200 000 0,02 — — — —

#Beneficial indirect interest in BEE Special Purpose Entities.

At 30 June 2011Director Direct

Beneficial indirect Total % held Direct

Non-beneficial

indirect Total % held

G A M Ravazzotti 14 637 088 345 980 215 360 617 303 34,90 — — — —P D Swatton 12 896 400 — 12 896 400 1,25 — — — —S I Gama# 200 000 — 200 000 0,02 — — — —

#Beneficial indirect interest in BEE Special Purpose Entities.

directors’ participation in the lonG-terM incentiVe plan and share appreciation riGhts scheMe

Directors’ holdings under the long-term incentive plan and share appreciation rights scheme are set out in the table below:

DirectorAwards held at

1 July 2011awarded

during the yearexercised during

the yearawards held at

30 June 2012

P D Swatton 1 700 000 850 000 — 2 550 000

Refer to note 6 for further details pertaining to these schemes.

directors’ eMoluMents

The emoluments paid to each director during the year by a subsidiary company are set out in the table below.

All emoluments paid to directors are short term in nature, other than gains on exercise of share options, and contributions to medical aid and

provident fund.

The remuneration of both executive and non-executive directors is determined by the Remuneration Committee. Other benefits include the fringe

benefit value of company cars for executive directors and fees for services rendered by non-executive directors.

All figures in R000’s Salary

Bonus performance-

related payments

Provident fund and medical

contributions

Gain on exercised

share awards

Other benefits

total 2012

Total2011

executive directors and chairmanG A M Ravazzotti* 696 187 — — — 883 908P D Swatton 1 649 485 275 — 304 2 713 2 304P Langenhoven# 1 294 76 175 — 49 1 594

2012 3 639 748 450 — 353 5 190

2011 3 299 878 317 7 010 1 291 12 795

*Paid to Rallen (Pty) Limited, the company that this director represents for his services as director of Italtile Limited. Refer to note 34.#Paid by Italtile (Australia) Pty Limited.


All figures in R000’sBoard

feesOther

benefitstotal 2012

Total2011

non-executive directorsS I Gama 166 — 166 135S M du Toit 297 — 297 243A Zannoni 117 — 117 99S G Pretorius 182 — 182 —

2012 762 — 762

2011 477 — 477

Aggregate emoluments of directors who served during the year 5 952 13 272

suBsidiarY coMpanies

Details of the Company’s interest in its subsidiaries are set out on page 100.

The Company’s interest in the profits and losses after taxation and the non-controlling shareholders’ interest of its subsidiaries (direct and

indirect) is:

2012rm’s

2011Rm’s

Profits 388 327

corporate GoVernance

The Corporate Governance report is set out on pages 42 to 54.

shareholders

An analysis of the shareholdings of the Company appears on page 101 of this report.

eMploYees

The Group employs 683 employees (2011: 609).

special resolution

At the annual general meeting of shareholders held on Friday, 25 November 2011, three special resolutions were approved by the requisite

majority of votes, namely: authorising the Company to repurchase its own shares; authorising the Company to provide financial assistance to

related and inter-related entities; and approving directors’ remuneration.

Full details of the special resolutions passed will be made available to shareholders on request.

Directors’ report continued


eVents suBsequent to the stateMent of financial position date

offer to ceramic industries limited (ceramic)

Italtile and Ceramic shareholders were advised on 28 May 2012

that Italtile had expressed an interest in making an offer to

Ceramic shareholders other than Rallen (Pty) Limited (“Rallen”),

the majority shareholder of both Italtile and Ceramic, to acquire

between 15% and 20% of the issued share capital of Ceramic for

a cash consideration of R130 per Ceramic share. Ceramic

shareholders were advised that, should Italtile succeed, this

would lead to a proposal to delist Ceramic from the JSE.

Shareholders were subsequently advised on 29 June 2012 that

Italtile had completed a due diligence exercise on Ceramic to its

satisfaction and confirmed that the price per Ceramic share at

which the Offer would be extended would remain at R130 per

Ceramic share.

Shareholders were further advised on 31 July 2012 that the Italtile

Board of Directors and a committee of Ceramic directors

(independent of Italtile and Rallen) were in the process of finalising

the documents and amendments to trust deeds and agreements

that are required to satisfy Italtile’s pre-conditions to making the

Proposed Offer.

On 31 August 2012, shareholders were advised that the

conditional offer would be made at a consideration of R130 per

share and that Ceramic’s Board had resolved to apply to the JSE

for the termination of its listing.

Black economic empowerment (Bee)

On 2 July 2012, shareholders were advised that Italtile’s BEE

structure had been revised, with the exit of BEE shareholder,

Arrow Creek, and the subsequent acquisition of that entity’s 24,6

million shares by the Foundation Trust, a registered public benefit

organisation, in accordance with the Group’s policy that the

former Arrow Creek shareholding continue to be held by a BEE

entity. The general meeting approving the transaction was held

on 14 August 2012.

Eighty five per cent of all distributions made by the Trust will be for

the benefit of black people.

the italtile share incentiVe trust

In terms of the resolution passed at the shareholders’ meeting on

12 January 1993, the directors are authorised to make available

for the purposes of the scheme a maximum aggregate number of

136 470 068 ordinary shares (2011: 136 470 068), representing

13% of the issued share capital.

The scheme exists for the directors and senior management of

the Company with a limit of 15 400 000 shares which any one

participant may acquire.

The Trust holds sufficient shares to meet its commitments. Shares

will be bought in the open market by the scheme to meet any

future allocations.

No share option expense was recognised for this scheme in the

current year (2011: nil).

lonG-terM incentiVe plan and share appreciation riGhts scheMe

The Company adopted a long-term incentive plan in the 2009

financial year and a share appreciation rights scheme in the 2011

financial year, in accordance with which selected directors and

employees of the Group will receive a conditional right to receive

a cash award as determined by the rules of the plan and scheme.

This award is to be applied towards the obligatory subscription

and/or purchase of Company ordinary shares.

Directors and employees of the Company, as well as directors

and employees of any subsidiary within the Group which is

designed by directors of the Company as being a participating

company, are eligible to participate in the plan and scheme. In

addition, the directors of the Company may select certain

franchisees of the Group to participate in the plan and scheme, in

which event directors and employees of such franchisees will also

be eligible.


The movement in the number of notional shares available to

eligible participants is as follows:

number of awards

2012 2011

At 1 July 4 500 000 4 850 000Awarded during the year 3 550 000 2 200 000Vested during the year — (2 275 000)Cancelled during the year — (275 000)

At 30 June 8 050 000 4 500 000

Refer to note 6 for further disclosure related to the plan and

scheme.

BorroWinG poWers

In terms of the Memorandum of Incorporation, the Company has

unlimited borrowing powers.

litiGation

Legal proceedings have been instituted against Majuba Aviation

(Pty) Limited, a subsidiary company of the Group providing aircraft

charter services, by the family of one of the passengers who

passed away on board when the aircraft chartered by the Group

from Majuba Aviation crashed on 8 February 2011.

Majuba Aviation has in place adequate passenger liability

insurance; accordingly no material effect on the financial position

of the Group is anticipated.

auditors

Ernst & Young Inc. continued in office as auditors of Italtile

Limited. At the annual general meeting of 23 November 2012

shareholders will be requested to appoint Ernst & Young Inc. as

auditors for the 2013 financial year and it will be noted that

Mr S Strydom will be the individual registered auditor who will

undertake the audit.

secretarY

The Company Secretary is E J Willis, whose business and postal

address is:

registered office: The Italtile Building

Cnr William Nicol Drive and Peter Place

Bryanston 2021

postal address: PO Box 1689

Randburg 2125

telephone number: +27 (0) 11 510 9050

fax number: +27 (0) 11 510 9061


Statements of comprehensive incomefor the year ended 30 June 2012

coMpanY Group

2012Rm’s

2011Rm’s Note

2012rm’s

2011Rm’s

146 12 revenue 3 2 113 1 755

Turnover 3 1 845 1 521

Cost of sales 4 (1 113) (895)

Gross profit 732 626

Other operating income 228 206

135 — Dividend income from subsidiaries

4 5 Management fees

Expenses

Sales and distribution (295) (257)

(3) (4) General and administration (143) (129)

Profit on sale of property, plant and equipment 1 2

136 1 trading profit 5 523 448

7 7 Finance revenue 7 46 37

Finance cost 8 (24) (24)

Income from associate 14.2 5 8

143 8 profit before taxation 550 469

(8) (10) Taxation 9 (155) (130)

135 (2) profit/(loss) for the year 395 339

other comprehensive income, net of tax:

Currency translation difference 31 7

Aircraft revaluation — (6)

135 (2) total comprehensive income/(loss) for the year 426 340

Profit/(loss) attributable to:

135 (2) Owners of the parent 378 321

Non-controlling interests 17 18

135 (2) 395 339

Total comprehensive income/(loss) attributable to:

135 (2) Owners of the parent 409 322

Non-controlling interests 17 18

135 (2) 426 340

Earnings per share (cents) 10 41,1 34,9

Headline earnings per share (cents) 11 41,0 34,6

Diluted earnings per share (cents) 10 41,0 34,8

Diluted headline earnings per share (cents) 11 40,8 34,5


Statements of financial positionat 30 June 2012

coMpanY Group

2012rm’s

2011Rm’s Note

2012rm’s

2011Rm’s

assets305 305 non-current assets 1 223 1 070

Property, plant and equipment 13 1 154 1 006239 235 Investments 14.1 4 4

Investment in associate 14.2 24 2266 70 Long-term assets 15 24 24

Goodwill 16 6 6Deferred taxation 17 11 8

458 452 current assets 1 400 1 226

Inventories 18 339 241454 450 Trade and other receivables 19 126 135

4 1 Cash and cash equivalents 20 917 839# 1 Taxation 28 18 11

763 757 total assets 2 623 2 296

equity and liabilities

760 755equity attributable to equity holders of the parent 1 931 1 637

818 818 Stated capital 21 818 818Non-distributable reserve 22 82 51Treasury shares (478) (478)

9 5 Share option reserve 6 9 5(67) (68) Retained earnings 1 500 1 241

non-controlling interest 77 70

760 755 total equity 2 008 1 7073 2 total liabilities 615 589

non-current liabilities 323 327

Interest-bearing loans and borrowings 23 315 321Deferred taxation 17 8 6

3 2 current liabilities 292 262

3 2 Trade and other payables 24 224 217Provisions 25 39 31Interest-bearing loans and borrowings 23 26 10Taxation 28 3 4

763 757 total equity and liabilities 2 623 2 296

#Less than R1 million.


Statements of changes in equityfor the year ended 30 June 2012

Rm’sStatedcapital

Non-distri-

butablereserve

Treasuryshares

Share optionreserve

Retainedearnings Total

Non-controlling

interestsTotal

equity

GroupBalance at 30 June 2010 818 50 (470) 3 1 021 1 422 61 1 483

Profit for the year 321 321 18 339Other comprehensive income for the year 1 1 1

Total comprehensive income for the year 1 321 322 18 340

Dividends paid (101) (101) (8) (109)Purchase of shares by share trust (8) (8) (8)Transactions with non-controlling interests — (1) (1)Share incentive cost (including acceleration) 11 11 11Settlement of accelerated share incentive costs (9) (9) (9)

Balance at 30 June 2011 818 51 (478) 5 1 241 1 637 70 1 707

Profit for the year 378 378 17 395Other comprehensive income for the year 31 31 31

Total comprehensive income for the year 31 378 409 17 426

Dividends paid (119) (119) (12) (131)Transactions with non-controlling interests — 2 2Share incentive cost 4 4 4

Balance at 30 June 2012 818 82 (478) 9 1 500 1 931 77 2 008

Note 21 22 6

Rm’sStatedcapital

Share optionreserve

Retained earnings

Totalequity

coMpanY

Balance at 30 June 2010 818 3 48 869Loss for the year (2) (2) Dividends paid (114) (114)Share incentive cost 2 2

Balance at 30 June 2011 818 5 (68) 755

Profit for the year 135 135Dividends paid (134) (134)Share incentive cost 4 4

Balance at 30 June 2012 818 9 (67) 760

Note 21 6


coMpanY Group

2012rm’s

2011Rm’s Note

2012rm’s

2011Rm’s

cash flows from operating activitiesCash receipts from customers 1 845 1 508Cash paid to suppliers and employees (1 349) (1 042)

2 (1) Cash generated/(utilised by) by operations 27 496 4667 7 Finance revenue 7 46 37

135 — Dividends received from subsidiary(7) (10) Taxation paid 28 (161) (116)

Finance cost 8 (24) (24)4 5 Management fees received

(134) (114) Dividends paid 29 (131) (109)

7 (113) Net cash flows from/(utilised by) operating activities 226 254

cash flows from investing activitiesAdditions to property, plant and equipment 13 (120) (135)Proceeds on disposal of plant and equipment 6 44

(4) (1) Increase in investments — (10)Lease premiums paid 15 — (6)Net acquisition and disposal of interest in subsidiary, including transactions with non-controlling interests 30 (34) —

4 3Repayments of portion of BEE share trust loan 15

— 2 Net cash flows from/(utilised by) investing activities (148) (107)

cash flows from financing activitiesDecrease in interest-bearing loans and borrowings — (11)Purchase of treasury shares — (8)

(4) 112 (Increase)/decrease in amounts owing by subsidiaries

(4) 112 Net cash flows (utilised by)/ from financing activities — (19)

3 1Movement in cash and cash equivalents for the year 78 128

1 —cash and cash equivalents at beginning of year 839 711

4 1cash and cash equivalents at end of year 20 917 839

Statements of cash flowsfor the year ended 30 June 2012


1. accountinG policies

1.1 statement of complianceThe consolidated and separate financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (“IFRS”) and its interpretations issued by the International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”).

1.2 Basis of preparationThe consolidated and separate financial statements are prepared on the historical-cost basis, adjusted for the fair valuing of certain assets and liabilities. The accounting policies set out below have been applied consistently to all periods presented in these consolidated and separate financial statements.The following standards and interpretations are effective for the current financial year but did not have an impact on the Group (which includes the consolidated and separate financial statements) for the year ended 30 June 2012:• IFRS 1 – Amendment to IFRS 1 – Severe hyperinflation and removal of fixed dates for first-time adopters. • IFRS 7– Amendment to IFRS 7 – Transfers of financial assets.• IAS 24 – Related party disclosures (revised).• IFRIC 14 – Amendment to IFRIC 14 – Prepayments of a minimum funding requirement.• May 2010 improvements to IFRS.The financial statements are presented in South African rands and all values are rounded to the nearest million (R’000 000), except where otherwise indicated.

1.3 Judgements and estimatesThe preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.The key assumptions concerning the future and key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, relates to the following:

Inventory obsolescence provisionThe Group determines whether there is obsolete inventory on an annual basis. This requires an estimation of the expected future saleability of inventory items based on historical experience, an analysis of market and fashion trends and a review of the ageing of the inventory items. Details pertaining to carrying values and write-offs are provided in note 18.

Impairment of land and buildingsThe Group determines whether any of the land and buildings are impaired at each reporting date. This requires consideration of the current and future economic and trading environment; available valuation information and the physical state of the land and buildings, to ascertain if there are indications of impairment to those owned by the Group. No impairments were recorded during the current financial year, and carrying values are disclosed in note 13.

Share-based paymentsThe Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility and dividend yield and making assumptions about them. The assumptions and models used are disclosed in note 6. The carrying value of the share option reserve at year end is R9 million (2011: R5 million) and expense recognised for the year is R4 million (2011: R11 million).

1.4 Basis of consolidationThe consolidated financial statements incorporate the results and financial position of the Company, its subsidiaries, its associates, the Share Incentive Trust, the BEE Trust and its joint venture interests.Subsidiaries are those companies in which the Group has an interest of more than one half of the voting rights or otherwise has the power to exercise control over the operations. The results of subsidiaries are included from the effective dates of acquisition, being the dates on which the Group obtains control, until the dates that control ceases. The identifiable assets and liabilities of companies acquired are assessed and included in the statement of financial position at their fair values as at the effective dates of acquisition.All intragroup balances, transactions, unrealised gains and losses resulting from intragroup transactions and dividends are eliminated in full.

Notes to the financial statementsfor the year ended 30 June 2012


1. accountinG policies (continued)

1.4 Basis of consolidation (continued)All companies in the Group maintain consistent accounting policies and have the same year ends.Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to equity holders of the parent.Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:• derecognises the assets (including goodwill) and liabilities of the subsidiary;• derecognises the carrying amount of any non-controlling interest;• derecognises the cumulative translation differences, recorded in equity;• recognises the fair value of the consideration received;• recognises the fair value of any investment retained;• recognises any surplus or deficit in profit or loss; and• reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or retaining

earnings, as appropriate.Joint ventures are those enterprises over which the Group exercises joint control in terms of a contractual agreement. Investments in jointly controlled entities are accounted for by way of the proportionate consolidation method whereby the Group’s proportional share of the assets, liabilities, revenue, expenses and cash flows of joint ventures are combined on a line-by-line basis, with similar items in the financial statements of the Group. Adjustments are made in the Group’s consolidated financial statements to eliminate the Group’s share of intragroup balances, income and expenses and unrealised gains and losses on transactions between the Group and its jointly controlled entities. The results of joint ventures are included from the effective dates of their acquisition and up to the effective dates of their disposal, or a date on which joint control ceases.

1.5 Business combinations and goodwillNew acquisitions are included in the Group’s financial statements using the acquisition method whereby the assets, liabilities and contingent liabilities are measured at their fair value. The purchase consideration is allocated on the basis of fair values at the date of acquisition.Goodwill is initially measured at cost and represents the excess of the purchase consideration over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity at the date of acquisition.Following initial recognition, goodwill is measured at cost, less any accumulated impairment losses. Goodwill carried in the statement of financial position is not amortised. Goodwill is reviewed for impairment annually or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired.As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the acquisition. Impairment is determined by assessing the recoverable amount of the cash-generating unit, to which the goodwill relates.Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of the cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of, is included in the carrying amount of the operation when determining the gain or loss on disposal of that operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit which is retained.

1.6 investment in subsidiaries and joint ventures (as accounted for on an entity level within the Group)Investment in subsidiaries and joint ventures are initially recorded at cost, being the fair value of the consideration given and including acquisition charges associated with the investment. Investments are carried at cost, less impairment.The carrying value of the subsidiaries is reviewed for impairment at every reporting date. Where necessary, the value of the investment is impaired to the greater of the fair value less costs to sell or the value in use.The difference between the net proceeds on disposal and the carrying amount of investments is charged to profit or loss in the statement of comprehensive income.

1.7 treasury sharesShares in Italtile Limited held by the Group are classified in equity attributable to equity holders of the parent as treasury shares. These shares are treated as a deduction from the issued and weighted average number of shares. Dividends received on treasury shares are eliminated on consolidation. No gain or loss on the purchase, sale, issue or cancellation of the Group’s listed shares is recognised in the statement of comprehensive income. Consideration received or paid with regards to treasury shares is recognised in equity.

Notes to the financial statements continued




1.8 foreign currenciesThe consolidated and separate financial statements are presented in rands, which is the Group’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.All differences are taken to profit or loss with the exception of all monetary items that provide an effective hedge for a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.The Group has investments in foreign subsidiary companies which are classified as foreign operations with functional currencies that are different to that of the Group. The financial statements of these subsidiaries are translated for incorporation into the Group financial statements as follows:• Assets and liabilities at the rates ruling at the reporting date.• Statement of comprehensive income items at a weighted average rate for the period.• Cash flow items at a weighted average rate for the period.• Equity items at the appropriate historical rate.Exchange differences are taken directly to a foreign currency translation reserve which is disclosed in other comprehensive income in the statement of comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in other comprehensive income, relating to that particular foreign entity, is recognised in profit or loss.

1.9 property, plant and equipmentAll buildings, including investment properties, are carried at cost less accumulated depreciation and accumulated impairment.A valuation to open market value for existing use is done on an annual basis for disclosure and impairment purposes.All plant and equipment, excluding aircraft, is stated at cost less accumulated depreciation and accumulated impairment.Aircraft are carried at fair value less accumulated depreciation. Revaluations are done with sufficient regularity to ensure that the carrying amount at the reporting date does not differ materially from its fair value. Any surplus arising on revaluation is recognised within other comprehensive income, except to the extent that it reverses a previous deficit recognised in profit or loss. Any deficit arising on revaluation is recognised in profit or loss, except to the extent that it reverses a previous revaluation surplus recognised in other comprehensive income. The asset revaluation reserve is transferred to retained earnings on derecognition of the underlying asset.Depreciation is calculated on the straight-line basis estimated to write each asset down to estimated residual value over the term of its useful life at the following annual rates:• Buildings 2%• Plant and machinery 20% to 25%• Vehicles 20% to 25%• Computer equipment 20% to 33,3%• Furniture and fittings 16,6% to 33,3%• Aircraft 20%Depreciation commences when the asset is available for use. The useful lives, methods of depreciation and residual values are reviewed, and adjusted if appropriate, at each financial year end. Land is not depreciated.The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.


1.9 property, plant and equipment (continued)Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset. In addition, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of the recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income.An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains and losses on derecognition of assets are determined by reference to their carrying amount and the net disposal proceeds and are taken to the statement of comprehensive income in the year the asset is derecognised.

1.10 inventoryInventory is valued at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and costs necessary to make the sale. Cost is determined on a weighted average cost method and excludes cash discounts, rebates and relevant indirect taxes.

1.11 taxesCurrent income taxCurrent income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Current tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred income taxDeferred income tax is provided on the liability method, on recognised temporary differences at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.Deferred tax liabilities are recognised for all taxable temporary differences, other than in the circumstances described below. Deferred tax assets are recognised for all deductible temporary differences, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward or unused tax assets and unused tax losses can be utilised, other than in the circumstances described below. Furthermore, deferred tax assets are reviewed at each reporting date. The carrying amount is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Any such reduction shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.Deferred tax assets and liabilities are not recognised where they arise from goodwill arising on acquisition or from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.Deferred income tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Secondary tax on companies (STC)STC is provided in respect of expected dividend payments, net of dividends received or receivable, and is recognised as a taxation charge in the year in which the dividend is declared. Where applicable, non-resident shareholders’ taxation is provided in respect of foreign dividends receivable. In prior financial periods, to the extent that it was probable that entities within the Group with STC credits would declare dividends of its own against which unused STC credits could be utilised, a deferred tax asset was raised.

Offset of tax assets and liabilities The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Value added tax (VAT)Revenues, expenses and assets are recognised net of the amount of VAT except:• where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT

is recognised as part of the cost of acquisition of the asset or as part of the expense items, as applicable; and• receivables and payables that are stated with the amount of VAT included.The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of other receivables or other payables in the statement of financial position.






1.12 Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

1.13 revenue recognitionRevenue from the sale of goods is measured at the fair value of the consideration received or receivable and is recognised when the significant risks and rewards of ownership are transferred to the buyer. It excludes cash discounts, rebates and relevant indirect taxes.Revenue from fixed property rental is turnover-related and recognised when the sale of goods, takes place.Interest is recognised on a time proportion basis which takes into account the effective yield on the asset over the period it is expected to be held.Dividends are recognised when the right to receive payment is established.Revenue from franchise income and royalties is recognised on the accrual basis in accordance with the substance of the agreement.Flight income is recognised when the services are delivered. It excludes cash discounts, rebates and relevant indirect taxes.

1.14 employee benefitsRetirement benefits

Defined-contribution planCurrent contributions to the retirement benefit plan are the best estimate of current service costs and are charged against income as services are rendered by the employee.

1.15 equity participation planSelected employees, including directors, of the Group receive remuneration in the form of share options, whereby they render services in exchange for rights over shares. The cost of share options is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using a Black-Schöles option-pricing model, further details of which are given in note 6. In valuing the share options, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Italtile Limited.The cost of the share options is recognised, together with a corresponding increase in shareholders’ equity, over the vesting period ending on the date on which the performance conditions are fulfilled and the employees become fully entitled to take up the share options. The cumulative expense recognised for share options granted at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and the number of share option grants that will ultimately vest in the opinion of the directors of the Group, at that date. This is based on the best available estimate of the number of share options that will ultimately vest. No expense is recognised for share options that do not ultimately vest.Where the terms of the share options are modified, as a minimum, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transactions, as a result of the modification, as measured at the date of modification.Where a share option is forfeited prior to vesting, any expense previously recognised for the award is reversed immediately. Where an award is cancelled, other than an award cancelled by forfeiture when the vesting conditions are not satisfied, it is treated as if it vested on the date of cancellation, and any expense not yet recognised, is recognised immediately. If a new share option is substituted for the cancelled share option, and designated as a replacement share option on the date that it is granted, the cancelled and new share option grant are treated as if they were a modification of the original grant, as described above.The dilutive effect of outstanding options is reflected as a share dilution in the computation of diluted earnings per share (refer to note 10).


1.16 financial instrumentsFinancial instruments carried on the statement of financial position comprise cash and cash equivalents, available-for-sale investments, trade and other receivables, trade and other payables, and interest-bearing loans and borrowings.

ClassificationThe Group’s financial assets and financial liabilities are classified as follows:description of asset/liability classificationInvestments Available-for-saleLoan to BEE Trust Loans and receivablesTrade and other receivables Loans and receivablesCash and cash equivalents Loans and receivablesInterest-bearing loans and borrowings Financial liability carried at amortised costTrade and other payables Financial liability carried at amortised cost

MeasurementAll financial instruments are recognised at the time the Group becomes party to the contractual provisions of the instruments. Financial instruments are initially measured at fair values. Directly attributable transaction costs are included in the fair value, unless it is classified as fair value through profit or loss. The Group assesses whether embedded derivatives are required to be separated from host contracts when the Group first becomes party to the contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

Investments that are considered available-for-sale financial assets are carried at fair value, except for unlisted equity investments which are carried at cost as a reliable measure of fair value cannot be determined. All movements are recognised in other comprehensive income, until the investment is derecognised or determined to be impaired at which time the cumulative gain or loss previously recorded in other comprehensive income is recognised in profit or loss. Objective evidence of impairment would include a significant or prolonged decline in the fair value of an investment below its carrying value. If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the statement of comprehensive income, is transferred from other comprehensive income to profit or loss. Reversals of impairment recognised previously in respect of equity instruments classified as available-for-sale are not recognised in profit or loss.

Cash and cash equivalents that have a fixed maturity date are subsequently measured at amortised cost using effective interest rates.

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, trade and other receivables are subsequently carried at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the statement of comprehensive income when trade and other receivables are derecognised or impaired, as well as through the amortisation process. In relation to trade receivables, a provision for impairment is made where there is objective evidence (such as probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectable. If there is objective evidence that an impairment loss on other receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the receivable is reduced through the use of an allowance account. The amount of the loss is recognised in profit or loss.

Trade and other payables are subsequently measured at amortised cost.

Interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

Derivative financial instrumentsThe Group uses foreign exchange contracts to manage its risks associated with foreign currency fluctuations. It is the Group’s policy not to trade in derivative financial instruments. Details of the Group’s financial risk management objectives and policies are set out in note 33.All derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Any gain or loss from remeasuring the derivative financial instrument to fair value is recognised immediately in profit or loss.The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.






1.16 financial instruments (continued)

Derecognition of financial instruments

Financial assetsA financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:• the rights to receive cash flows from the asset have expired;• the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material

delay to a third party under a ‘pass through’ arrangement; or• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks

and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flow from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.When an existing financial liability is replaced by another from the same lender of substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

Offset of financial instrumentsFinancial assets and liabilities are set off against each other where there is an intention to settle the amounts simultaneously, and a currently enforceable legal right of set-off exists.

1.17 leasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date, of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets, or the arrangement conveys a right to use the asset.

Group as a lesseeAssets leased in terms of agreements, which are considered to be finance leases, are capitalised. Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred from the lessor to the Group, as lessee. Assets subject to finance leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the minimum lease payments, with the related lease obligation recognised at the same value. Capitalised leased assets are depreciated at the same rates and on the same basis as equivalent owned assets. Should there be no reasonable expectation that the Group will obtain ownership by the end of the lease term, the depreciation period is the shorter of the estimated useful life of the asset and the lease term. Where the carrying amount of an asset is greater than its estimated recoverable amount (ie the higher of value in use and fair value less costs to sell), it is written down immediately to its recoverable amount, based on the value in use or fair value less costs to sell. Lease finance charges are amortised over the duration of the leases, using the effective interest rate method and reflected in finance cost in the statement of comprehensive income.All other leases are treated as operating leases and the relevant rentals are charged to profit or loss on a straight-line basis.

Group as a lessorLeases where the Group does not transfer substantially all the risks and benefits of ownership of the asset, are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.



1.18 dividends paidDividends paid are recognised as appropriations of reserves in the statement of changes in equity at the dates of declaration.

1.19 investment in associateThe Group’s investment in its associate is accounted for using the equity method. An associate is an entity in which the Group has significant influence.Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.The statement of comprehensive income reflects the share of the results of operations of the associate in profit or loss. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.The share of profit of an associate is included in profit or loss. This is the profit attributable to equity holders of the associate and therefore is profit after tax and non-controlling interests in the subsidiaries of the associate.The financial statements of the associate are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss.

1.20 standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Group’s financial statements are listed below. This listing is of standards and interpretations issued, which the Group reasonably expects to be applicable at a future date. The Group intends to adopt those standards when they become effective. The Group expects that adoption of these standards, amendments and interpretations in most cases not to have any significant impact on the Group’s financial position or performance in the period of initial application but additional disclosures will be required. In cases where it will have an impact the Group is still assessing the possible impact.

IAS 1 – Financial Statement Presentation (Amendment)The amendment is effective for annual periods beginning on or after 1 July 2012 and requires that items of other comprehensive income be grouped in items that would be reclassified to profit or loss at a future point and items that will never be reclassified. This amendment only effects the presentation in the financial statements.

IAS 12 – Income Taxes (Amendment)The amendment is effective for annual periods beginning on or after 1 January 2012 and introduces a rebuttable presumption that deferred tax on investment properties measured at fair value will be recognised on a sale basis, unless an entity has a business model that would indicate the investment property will be consumed in the business. If consumed, a use basis should be adopted. This amendment will have no impact on the Group after initial application.

IAS 19 – Post Employee Benefits (Amendment)The amendments are effective for annual periods beginning on or after 1 January 2013. There are changes to post employee benefits in that pension surpluses and deficits are to be recognised in full (no more deferral mechanisms) and all actuarial gains and losses recognised in other comprehensive income as they occur with no recycling to profit or loss. Past service costs as a result of plan amendments are to be recognised immediately.Short and long-term benefits will now be distinguished based on the expected timing of settlement, rather than employee entitlement.

IAS 27 – Separate Financial StatementsIAS 27, as revised, is limited to the accounting for investments in subsidiaries, joint ventures and associates in the separate financial statements of the investor. The revision is a consequence of the issue of IFRS 10, and the standard is effective for annual periods beginning on or after 1 January 2013.





1.20 standards issued but not yet effective (continued)

IAS 28 – Investments in Associates and Joint Ventures The revised standard caters for joint ventures (now accounted for by applying the equity accounting method) in addition to prescribing the accounting for investments in associates. The revision is a consequence of the issue of IFRS 10 and 11, and the standard is effective for annual periods beginning on or after 1 January 2013.

IAS 32 – Financial instruments: Presentation (Amendment)The amendment clarifies the meaning of the entity currently having a legally enforceable right to set off financial assets and financial liabilities as well as the application of IAS 32 offsetting criteria to settlement systems (such as clearing houses). The amendment is effective for annual periods beginning on or after 1 January 2014, and will have no impact on the Group.

IFRS 7 – Financial instruments: Disclosures (Amendment)The amendment provides additional disclosures with regards to offsetting financial assets and financial liabilities (similar to current US GAAP requirements), is effective for annual periods beginning on or after 1 January 2013, and will have no impact on the Group.

IFRS 9 – Financial Instruments: Classification and MeasurementIFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. In subsequent phases, the Board will address impairment and hedge accounting. The adoption of the first phase of IFRS 9 will primarily have an effect on the classification and measurement of the Group’s financial assets and liabilities. The Group is currently assessing the impact of adopting IFRS 9, however, the impact of adoption depends on the assets and liabilities held by the Group at the date of adoption, it is not practical to quantify the effect.

IFRS 10 – Consolidated Financial StatementsIFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC 12 Consolidation – Special Purpose Entities. IFRS 10 establishes a single control model with a new definition of control that applies to all entities. The standard is effective for annual periods beginning on or after 1 January 2013. The changes will require management to make significant judgement to determine which entities are controlled and therefore required to be consolidated by the parent. Therefore, IFRS 10 may change which entities are within the Group.

IFRS 11 – Joint ArrangementsIFRS 11 replaces IAS 31 Interest in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by Ventures. IFRS 11 uses the principle of control in IFRS 10 to determine joint control which may change whether joint control exists. IFRS 11 addresses only two forms of joint arrangements; joint operations where the entity recognises its assets, liabilities, revenues and expenses and/or its relative share of those items and joint ventures which is accounted for on the equity method (no more proportional consolidation). The standard is effective for annual periods beginning on or after 1 January 2013 and the impact on the Group can not be determined at this point.

IFRS 12 – Disclosure of Interest in Other EntitiesIFRS 12 includes all the disclosures that were previously required relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities as well as a number of new disclosures. An entity is now required to disclose the judgements made to determine whether it controls another entity. The standard is effective for annual periods beginning on or after 1 January 2013. The Group will need to consider the new definition of control to determine which entities are controlled or jointly controlled and then to account for them under the new standards.

IFRS 13 – Fair Value MeasurementIFRS 13 establishes a single framework for all fair value measurement (financial and non-financial assets and liabilities) when fair value is required or permitted by IFRS. IFRS 13 does not change when an entity is required to use fair value but rather describes how to measure fair value under IFRS when it is permitted or required by IFRS. There are also consequential amendments to other standards to delete specific requirements for determining fair value. The Group will need to consider the new requirements to determine fair values going forward. IFRS 13 will be effective for the Group 1 July 2013.The Group and Company are still in the process of assessing the impact of the Annual Improvements Project issued in May 2012.

http://www.cga-pdnet.org/Non_VerifiableProducts/ArticlePublication/IFRS_E/IAS_32.pdf


2. definitions2.1 system-wide turnover

Aggregated turnover of the Group-owned and franchised stores.

2.2 cost of salesCost of sales is calculated as the weighted average cost of inventory, including distribution costs incurred in bringing the inventory to the retail locations together with stock losses.

2.3 sales and distribution costsSales and distribution costs include costs incurred in bringing inventory to the retail locations and ensuring the saleability thereof.

2.4 General and administrative expensesGeneral and administrative expenses are those overhead expenses that have not been allocated to inventory valuation.

2.5 cash and cash equivalentsThe cash and cash equivalent amounts comprise cash in hand, deposits held on call with banks and highly liquid investments that are readily convertible to known amounts of cash and are subject to insignificant changes in value.

2.6 treasury sharesShares in Italtile Limited held by the entities in the Group.

2.7 cash-generating unitA cash-generating unit is the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

3. reVenue

Total revenue comprises:Turnover 1 845 1 521Rental income 101 91

7 7 Finance revenue 46 37135 — Dividend income from subsidiaries

Royalty income from franchising 89 78Other franchise income 32 27Flight income — 1

4 5 Management fee

146 12 2 113 1 755

Turnover represents net sales, excluding value added tax and intercompany sales.All the rental income pertains to properties that are leased to franchised stores. These rentals are turnover related and can therefore not be predetermined.

4. cost of salesCost of sales consists largely of the cost of inventories recognised as an expense. 1 113 895


coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

5. tradinG profitTrading profit is stated after taking into account the following items:auditors’ remuneration

# # – Audit fee 3 3# # – Expenses # #

# # 3 3

depreciationOwned and leased

– Buildings 11 8– Plant and machinery 7 7

– Vehicles 3 2– Aircraft — #

– Computer equipment 5 3– Furniture and fittings 20 25

46 45

operating lease payments– Properties 15 15All the operating leases pertain to properties that are rented and then sublet to Group-owned and franchised stores. The subrentals are based on 6,3% of turnover and can therefore not be predetermined. At current levels they exceed abovementioned obligations.Contingent lease payments were determined, based on escalated contractual rentals charged by third parties. Certain leases have renewal terms. There are no trading restrictions on any of the leases.Total of future minimum contracted operating lease payments: Within 1 year 7 11 Within 2 – 5 years 11 8 Later than 5 years 2 2

20 21

directors’ emolumentsRefer to pages 62 and 63 of the directors’ report for detailed disclosures.employee remuneration– Salaries and wages 115 93

– Profit share 15 22– Contributions to retirement benefits 10 8

140 123

otherProfit on sale of property, plant and equipment 1 2





6. share-Based paYMentsshare incentive trust

In terms of the Share Incentive Trust, shares are offered on a combined option and deferred sale basis. Options vest over a period of five years. An agreement of deferred sale is automatically constituted on acceptance of the offer. All shares must be taken up by way of a purchase and delivery by no later than five years after the grant date. The exercise price of the option is not less than the market value of the ordinary shares on the day prior to the date of grant and the option is exercisable provided that the participant has remained in the Group’s employ until the option vests. Should the participant resign before these vesting dates, the options will be forfeited. An exception may be made in the case of termination of employment as a result of death or retirement. Options are settled in equity once exercised and subsequently taken up.

In terms of a resolution passed at a shareholders’ meeting on 12 January 1993, the directors are authorised to make available for the purposes of the scheme a maximum aggregate number of 136 470 068 ordinary shares (2010: 136 470 068), representing 13% (2010: 13%) of the issued share capital. The scheme exists for the directors and senior management of the Company with a limit of 15 400 000 shares which any one participant may acquire.

The following assumptions were used in valuing the various option grants on grant date:

Expected volatility 18% to 24%Risk-free interest rate 8,19% to 8,54%Expected dividend yield 1,90% to 2,07%Expected life (years) 5,5

The expected life of the options is based on historical data and expected future trends and is not necessarily indicative of exercise patterns that may occur. The expected volatility of 18% to 24% reflects the assumption that the historical volatilities of 18% to 24% are indicative of future trends.

No share options were granted over the year to 30 June 2012 (2011: nil). Included in the expenses in the profit and loss for the year is Rnil (2011: Rnil) relating to the current year share option expense for the Share Incentive Trust.

All outstanding allocations were fully redeemed in 2010, with the redemption of 2 310 000 share allocations at an average subscription price of R2,39 per share. There were no further movements in 2011 or 2012.

Had the participant resigned from the Group prior to the commencement dates as indicated above, the shares for options would not have been awarded, payment not required and the options forfeited.

Black economic empowerment transaction

The Company issued 88 000 000 shares in terms of a Black Economic Empowerment, or BEE, transaction on 11 February 2008. The shares were issued at R4,57 per share, which represented a discount of 17% to the volume weighted average price of the Company’s shares over the month of March 2007. The transaction was funded by way of the Company subscribing to preference shares in the empowerment vehicles. These preference shares attract dividends at a rate of 70% of the prevailing prime interest rate. Any dividends paid on the Company’s shares to the empowerment vehicles will be firstly used to fund the preference share dividends payable to the Company, and then to redeem a portion of the outstanding preference shares.

The BEE partners may not sell or otherwise encumber the shares for a period of seven years, after which the Company will have the pre-emptive right to reacquire the shares at 83% of the trade weighted average price at which the Company’s shares traded on the JSE during the 10-trading days immediately preceding the date of purchase. The Company may force a repurchase of the shares after eight years have elapsed, again at 83% of the trade weighted average price at which its shares traded on the JSE during the 10-trading days immediately preceding the date of purchase. The cash proceeds from this sale will be used to settle any remaining obligations in terms of the preference shares.

For further details on this transaction, refer to the circular dated 20 June 2007.

The economic substance of this transaction is that the BEE partners have received an equity-settled call option over the Italtile Limited shares, which matures in eight years’ time. The cost of the transaction has been valued accordingly by using a Monte Carlo simulation model and using the following inputs:Share price R3,03Exercise price R4,57Volatility 28%Time to maturity 8 yearsRisk-free interest rate 9,89%Prime interest rate 13,21%Dividend yield 2%

The model is not particularly sensitive to the risk-free and prime interest rate assumptions, as any change in the one would generally be offset by a change in the other. The predicted volatility is based on an analysis of the historic Italtile Limited share price volatility, over the last seven years.

The total cost of the transaction was determined as R25 million, which was recognised in the 2008 financial year (no additional costs have subsequently been recognised).

As disclosed in the directors’ report on page 64, amendments to the BEE transaction were approved by shareholders after the 2012 financial year end.




6. share-Based paYMents (continued)

long-term incentive planDuring the 2010 financial year, a long-term incentive plan was adopted by the Company, in accordance with which selected directors and employees of the Group are entitled to receive notional share awards. These awards vest as follows: 25% after three years, and 75% after five years. The exercise price is determined in accordance with the rules of the scheme.The plan has been classified as an equity-settled share-based payment scheme and has been fair valued using a modified Black-Schöles model. The following assumptions and inputs were used in valuing the notional awards on grant dates:

Grant date 14 August 2009 1 October 2010

Notional share award 4 850 000 2 200 000Share price on grant date R3,35 R3,70Interest rate (source: Standard Bank) Zero yield curve (7,06% – 8,36%) Zero yield curve (5,98% – 7,28%)Dividend R0,11 per share per annum R0,11 per share per annum

The movement in the number of awards during the years is as follows:number of awards

2012 2011

At 1 July 4 500 000 4 850 000Awarded during the year — 2 200 000Vested and exercised during the year — (2 275 000)Cancelled during the year — (275 000)

At 30 June 4 500 000 4 500 000

The exercise price of awards exercised during the previous year was R4,12 per award.

The weighted average vesting period of awards outstanding at year end is 1,97 years (2011: 2,97 years).

The fair value of the awards granted over the previous year to 30 June 2011 was R7 million. Included in the expenses in the profit and loss for the year is R3 million (2011: R11 million) relating to the current year share-based payment expense for this scheme.

share appreciation rights schemeDuring the 2011 financial year, a share appreciation rights scheme was adopted by the Company, in accordance with which selected directors and employees of the Group are entitled to receive notional share awards. These awards vest as follows: 25% after three years, and 75% after five years. The exercise price is determined in accordance with the rules of the scheme.The plan has been classified as an equity-settled share-based payment scheme and has been fair valued using a modified Black-Schöles model. The following assumptions and inputs were used in valuing the notional awards on grant dates:

Grant date 1 October 2010 1 September 2011

Notional share award 500 000 3 050 000Grant price R3,56 R4,21Interest rate (source: Standard Bank) Zero yield curve (6,57% – 7,11%) Zero yield curve (5,71% – 6,39%)Dividend yield 2,66% 2,66%

The movement in the number of awards during the years is as follows:number of

awards

2012

At 1 July —Awarded during the year 3 550 000Vested and exercised during the year —Cancelled during the year —

At 30 June 3 550 000

The weighted average vesting period of awards outstanding at year end is 3,62 years.

The fair value of the awards granted over the previous year to 30 June 2012 was R2,4 million. Included in the expenses in the profit and loss for the year is R0,5 million relating to the current year share-based payment expense for this scheme.


coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

7. finance reVenueBank interest receivable 12 12Dividends from cash equivalents 34 25

7 7 Dividend income from special purpose entities

7 7 Total finance revenue 46 37

8. finance costBank loans and overdraft 24 23Finance charges payable under finance leases — 1

Total finance cost 24 24

9. taxationCurrent taxation

1 1 – Normal tax (including foreign taxes) 144 117— — – Deferred tax 2 27 9 – Secondary tax on companies 9 11

8 10 155 130

% % Reconciliation of tax rate % %28,0 28,0 Standard tax rate – South Africa 28,0 28,0

Adjusted for:(27,8) (22,5) Exempt income (1,7) (1,5)

0,5 5,5Other differences, including effect of foreign tax rates and prior period over/under provisions 0,2 (1,2)

4,9 107,7 Secondary tax on companies 1,7 2,4

5,6 118,7 Effective tax rate 28,2 27,7

10. earninGs per shareEarnings per share and diluted earnings per share is based on the income attributable to ordinary shareholders of R378 million (2011: R321 million).The calculation of earnings per share is based on 919 032 041 (2010: 919 995 338) weighted average number of shares in issue during the period, excluding weighted average treasury shares.The calculation of diluted earnings per share is based on:Weighted average number of shares in issue for basic earnings per share 919 032 041 919 995 338Potentially dilutive ordinary shares resulting from options outstanding 3 618 139 2 291 715

Weighted average number of shares for diluted earnings per share 922 650 180 922 287 053




coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

11. headline earninGs per shareThe calculation of headline and diluted headline earnings per share is based on the income attributable to ordinary shareholders – as used in the calculation for basic earnings, adjusted in terms of Circular 3/2012, “Headline Earnings”.reconciliation of headline and diluted headline earningsBasic earnings 378 321Profit on sale of property, plant and equipment (1) (2)

Gross amount (1) (2) Taxation # #

Share attributable to non-controlling shareholders — —

Headline and diluted headline earnings 377 319


Refer to note 10 for further details and calculations related to weighted average number of shares and diluted weighted average number of shares used to calculate headline and diluted headline earnings per share.

12a diVidends paid in the current Year62 52 Final 2011 – No 90

Paid 2012: 5 cents per share (2011: 5 cents) 55 46Interim 2012 – No 91

72 62 Paid 2012: 7 cents per share (2011: 6 cents) 64 55

134 114 Total – 13 cents per share (2011: 11 cents per share) 119 101

12b diVidends declared in relation to

current Year profitInterim – No 91

72 62 7 cents per share (2011: 6 cents per share) 64 55Final – No 92

72 62 7 cents per share (2011: 6 cents per share) 64 55

144 124 Total – 14 cents per share (2011: 12 cents per share) 128 110


land andbuildings*

rm’s

plant andmachinery

rm’sVehicles

rm’s

computerequipment

rm’s

furnitureand fittings

rm’stotal rm’s

13. propertY, plant and equipMent2012Owned and leasedBeginning of year– assets at cost 953 49 13 33 179 1 227– accumulated depreciation (29) (32) (5) (19) (136) (221)

– net book value 924 17 8 14 43 1 006Current year movements– additions 124 5 8 7 26 170– disposals (2) (1) (1) (1) # (5)– depreciation (11) (7) (3) (5) (20) (46)– translation 27 1 # 1 # 29

Balance at end of year 1 062 15 12 16 49 1 154

Made up as follows:– assets at cost 1 102 54 18 40 203 1 417– accumulated depreciation (40) (39) (6) (24) (154) (263)

– net book value 1 062 15 12 16 49 1 154

*Constituting owner- and related-party occupied properties.


Buildings with a cost of R856 million were valued on 30 June 2011 by independent professional valuers (authorised and registered in terms of the Property Valuers Professional Act No 47 of 2000), to a replacement value for existing use of R1,2 billion.

A register of the Group’s land and buildings is available for inspection at the Company’s registered office.

Land andbuildings*

Rm’s

Plant andmachinery

Rm’sVehicles

Rm’sAircraft

Rm’s

Computerequipment

Rm’s

Furnitureand fittings

Rm’sTotal Rm’s

2011Owned and leasedBeginning of year– assets at cost 868 44 9 31 21 166 1 139– accumulated depreciation (21) (27) (3) (1) (17) (118) (187)

– net book value 847 17 6 30 4 48 952Current year movements– additions 88 6 5 — 13 23 135– devaluation — — — (8) — — (8)– disposals (8) # (1) (22) # (3) (34)– depreciation (8) (7) (2) # (3) (25) (45)– translation 5 1 # — # # 6

Balance at end of year 924 17 8 — 14 43 1 006

Made up as follows:– assets at cost 953 49 13 — 33 179 1 227– accumulated depreciation (29) (32) (5) — (19) (136) (221)

– net book value 924 17 8 — 14 43 1 006

*Constituting owner- and related-party occupied properties.


The aircraft was revalued on 31 January 2011 by the Pilatus Centre Southern Africa, using the information of the Aviation Blue Book.




coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

14.1 inVestMentsUnlisted

8 8 Investment in subsidiaries13 9 Equity instruments – at cost 4 4

218 218 Preference shares

239 235 Directors’ valuation of unlisted investments 4 4

Investments in subsidiaries are carried at cost less accumulated impairment. A list of subsidiaries appears on page 100 .Unlisted equity instruments have no reliable measure of fair value as there is no active trading market for these instruments, therefore these investments are carried at cost less accumulated impairment.The fair value of the unlisted preference shares approximates the carrying amount as these instruments attract a floating rate of interest.

14.2 inVestMent in associateDuring the previous financial year, the Group began accounting for an existing investment in Ezee Tile, a national manufacturer of adhesive, grout and related products, in accordance with the equity accounting requirements of IAS 28 – Investments in associates. Management is of the opinion that significant influence over the operations of Ezee Tile was attained during the previous financial year, triggering the requirement to apply equity accounting for such.Cost 15 15Share of profits, post commencement of equity accounting 9 7

24 22

The following tables illustrate the summarised financial information of the Group’s investment in Ezee Tile:Statement of financial position:Non-current assets 9 6Current assets 73 66Non-current liabilities (1) (1)Current liabilities (34) (23)

Equity 47 48

Statement of comprehensive income:Turnover 319 238Profit for the year 11 21

Profit attributable to ordinary shareholders of Italtile Limited 5 8Less: Dividends (3) (1)

Share of associated companies’ income 2 7


coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

15. lonG-terM assets66 70 Loan to BEE Trust

Lease premiums 24 24

66 70 24 24

In order to raise funds necessary to purchase BEE shares (refer to note 6), the Company has funded the BEE Trust by way of a loan. This loan accrues interest at the prime lending rate from time to time. Interest will start accruing once the BEE Trust starts issuing shares to employees.Lease premiums are paid in advance on land leases that have a duration of between 35 and 50 years.

16. GoodWillMade up as follows:– cost 6 6– impairment — —

– Net book value 6 6

There has been no movement in the balance in the current and previous financial year.

17. deferred taxationDeferred tax assets 11 8Deferred tax liabilities (8) (6)

3 2

The deferred tax balance is made up as follows:

openingbalance

rm’s

chargedthrough

statement ofcomprehensive

incomerm’s

closingbalance

rm’s

Deferred tax asset: Accruals 7 (1) 6 Property, plant and equipment 2 4 6 Assessed loss 2 # 2

Deferred tax liability: Property, plant and equipment (9) (2) (11) Prepayments # # #

Net deferred tax asset 2 1 3

Deferred tax assets and liabilities are only offset when the income tax relates to the same legal entity or fiscal authority.The tax rate applied to South African entities is 28% (2011: 28%) for normal taxation and 10% (2010: 11%) for STC. Australian entities are taxed at 30% (2011: 30%).





coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

18. inVentoriesFinished goods and merchandise 339 241Inventory losses recognised as an expense totalled R9 million for the year (2011: R8 million). This expense is included in the general and administration expenses line item on the face of the statement of comprehensive income.

19. trade and other receiVaBlesTrade receivables 101 101Sundry debtors# 25 34

454 450 Amounts owing by subsidiary

454 450 126 135

#Includes prepayments, deposits and rebates receivable.

For terms and conditions relating to Group related-party receivables, refer to note 34.

Trade receivables are non-interest-bearing and are generally on 30-day terms.

The fair value approximates the carrying value due to the short-term nature of these balances.

The amounts owing by subsidiary represent amounts owing by Italtile Ceramics Limited. These amounts are unsecured, carry no interest and are payable on demand. Outstanding balances are settled from time to time based on the cash flow requirements of the various entities.

As at 30 June 2012, trade receivables at nominal value of R3 million (2011: R3 million) were impaired and fully provided for. Movements in the provision for impairment of trade receivables were as follows:

totalrm’s

at 30 June 2010 4Charge for the year (1)

at 30 June 2011 3

Utilised during the year #

Raised during the year #

at 30 June 2012 3


As at 30 June 2012, the ageing analysis of trade receivables is as follows:

past due, not impaired

totalrm’s

current (notimpaired)

rm’s

30 – 60daysrm’s

60 – 90daysrm’s

> 90 daysrm’s

2012 101 93 4 2 2

2011 101 96 1 1 3

Allowances have been raised on debt older than 90 days.


coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

20. cash and cash equiValents4 1 Cash at banks and on hand 154 193

Cash equivalents 763 646

4 1 917 839

Cash at banks earns interest at floating rates based on daily bank deposit rates. Cash equivalents are made for varying periods of between one day and three months, depending on immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.The fair value approximates the carrying value due to the short-term nature of these balances.

21. stated capitalAuthorised3 300 000 000 ordinary shares of no par valueIssued

818 8181 033 332 822 (2010: 1 033 332 822) ordinary shares of no par value 818 818

Number of shares in issue to external parties:1 033 332 822 1 033 332 822 Total shares in issue 1 033 332 822 1 033 332 822

Treasury shares: Share incentive trust (26 290 909) (26 290 909) BEE transaction (88 000 000) (88 000 000)

1 033 332 822 1 033 332 822 In issue to external parties 919 041 913 919 041 913

All unissued shares are under the control of the directors until the next annual general meeting.

capitalredemption

reserve fundaircraft

revaluation

foreigncurrency

translationreserve total

rm’s rm’s rm’s rm’s

22. non-distriButaBle reserVeBalance as at 30 June 2010 9 6 35 50Translation of foreign entities 7 7Aircraft devaluation (6) (6)

Balance as at 30 June 2011 9 — 42 51

Translation of foreign entities 31 31

Balance as at 30 June 2012 9 — 73 82




coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

23. interest-BearinG loans and BorroWinGsLoansRandThe loan bears interest at prime less 2% per annum and is repayable on 9 July 2013. The loan is secured by a cession of all shares and claims in Allmuss Properties (Pty) Limited. 300 300Australian dollarsLoans secured by a first mortgage over property that has a current value of R72 million (2011: R64 million). 41 31The first loan of R26 million bears interest at 8,4% per annum, and matures on 5 October 2012. The second loan of R9 million bears interest of 6,5% per annum, and matures on 2 December 2014.The third loan of R6 million bears interest at 6,17% per annum, and matures on 19 December 2014.

341 331Current portion of interest-bearing debt (26) (10)

Non-current portion of interest-bearing debt 315 321

The fair value of the long-term borrowings approximates the carrying value, as the current market rates of interest do not differ materially from those specified in the loan agreements.

24. trade and other paYaBlesTrade payables 168 152

3 2 Accruals/other payables 56 65

3 2 224 217

For terms and conditions relating to related parties, refer to note 34.Trade payables are non-interest-bearing and are normally settled on 30-day terms.Accruals/other payables are mostly non-interest-bearing and have an average term of three months.The fair value of all trade and other payables approximates the carrying value, due to the short-term nature of these balances.


leave payincentive

bonus totalrm’s rm’s rm’s

25. proVisionsBalance as at 30 June 2010 9 25 34Provision utilised (2) (10) (12)Provision raised 3 6 9

Balance as at 30 June 2011 10 21 31

Provision utilised (1) (16) (17)Provision raised 4 21 25

Balance as at 30 June 2012 13 26 39

Leave pay is provided on accumulated leave balances at year end based on employees’ cost to company.Provision for incentive bonus is expected to be realised when bonuses are paid in the 2013 financial year, and is based on terms as dictated in employment contracts (subject to the final approval from management).

coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

26. Joint VentureThe Group has a 50% interest in Ser Export s.p.a, a company incorporated in Italy.

Impact on Group statement of financial positionCurrent assets 39 36Non-current assets 13 14Current liabilities (non-interest-bearing) (27) (25)

Impact on Group statement of comprehensive incomeIncome 52 44Expenses (50) (43)

Impact on Group cash flow statementCash flow from operating activities 2 (7)Cash outflow from investing activities — (1)Cash from financing activities — —

There are no significant contingent liabilities or commitments in respect of this joint venture for which the Group is responsible (2011: nil).


coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

27. reconciliation of profit Before taxation to cash Generated froM operations

143 8 Profit before taxation 550 461Adjusted for: Depreciation 46 45 Profit on sale of property, plant and equipment (1) (2)

(7) (7) Finance revenue (46) (37)(135) — Dividends received from subsidiary

Finance cost 24 24

4 2 Share-based payment expense and non-cash

movements (3) (3)(4) (5) Management fee received

Working capital changes Increase in inventories (98) (9)

— — Decrease/(increase) in trade and other

receivables 9 (25)

1 1 Increase in trade and other payables,

including provisions 15 12

2 (1) Cash generated by operations 496 466

28. taxation paid1 1 Net amount prepaid/(unpaid) at beginning of year 7 19(8) (10) Charged per statement of comprehensive income (155) (130)

Deferred tax expense 2 2# (1) Net amount prepaid at end of year (15) (7)

(7) (10) Amounts paid (161) (116)


29. diVidends paid(134) (114) Charged per statement of changes in equity (119) (101)

Dividends paid to non-controlling interests (12) (8)

(134) (114) Amounts paid (131) (109)

30. Business coMBinations

Melkbos (pty) limitedIn March 2012 the Group elected to convert interest-bearing amounts advanced to an Australian property holding company, Melkbos (Pty) Limited to equity. The decision to capitalise the loans is consistent with the Group’s policy on property investment, and resulted in the Group acquiring an 83% interest in the company.

The fair value of net assets acquired and accounted for from the effective date comprise the following: R’m

Land and buildings 50Sundry receivables 1Sundry payables (1)Commercial bills (6)Cash and bank 3

Cost of business acquired 47Less amounts previously advanced and cash acquired (11)

Net cash outflow in 2012 36

From the effective date of the business combination, the company has made a negligible contribution to Group earnings.




coMpanY Group

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

31. coMMitMents and continGenciescapital commitmentsCapital expenditure for land and buildings, computer equipment and other fixed assets:Contracted 62 27Authorised but not contracted for 64 83

126 110

Capital expenditure will be financed from own resources.

operating lease commitmentsRefer to note 5 for details of lease commitments.

litigationRefer to page 65 of the directors’ report for details of legal proceedings instituted against a subsidiary of the Group.

32. eMploYee BenefitsThe Group participates in the Alexander Forbes Retirement Fund. This is an umbrella fund arrangement created for the provision of retirement benefits. The fund is a defined-contribution plan and is governed by the Pension Fund Act No 24 of 1956.

The financial position of the Alexander Forbes Retirement Fund (Provident Section): Italtile Limited is currently reviewed on a monthly basis. As at 30 June 2012, the fund was found to be in a sound financial position.

At 30 June 2012, 949 (2011: 870) employees of the Group and Franchises were members of the Fund, to which the Group contributed R15 million (2011: R14 million) and the employees Rnil (2011: Rnil).

The Fund is open to all permanent staff with their participation thereof being a condition of employment. Their dependants are eligible for death benefits accruing from the Fund in the event of the member’s death. All permanent full-time employees of franchise stores are required to participate in the Fund.

33. financial risK ManaGeMent oBJectiVes and policiesGroupThe Group’s principal financial liabilities, other than derivatives, comprise bank loans and trade payables. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets, such as trade receivables and cash and short-term deposits, which arise directly from its operations.

The main risk arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below. The Group’s primary objective of risk management is to reduce the uncertainty over future cash flows.

CompanyThe Company’s principal financial liabilities, comprise loans given to subsidiary companies and the BEE Trust. The Company’s financial assets comprise cash and short-term deposits, which arise directly from its investments.

The main risk arising from the Company’s financial instruments are cash flow interest rate risk, liquidity risk, and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

The Company’s primary objective of risk management is to reduce the uncertainty over future cash flows.

interest rate riskThe Company’s and Group’s exposure to the risk of changes in market interest rates relates primarily to the finance revenue generating ability of cash surpluses, servicing of Group long-term loans due to floating interest rates and preference shares held by the Company. To manage this risk, management constantly review cash placements and contract in financial expertise to ensure preferential interest rates are obtained for surplus funding.

As part of the process of managing the Group’s interest rate risk, interest rate characteristics of new borrowings are positioned according to expected movements in interest rates.




33. financial risK ManaGeMent oBJectiVes and policies (continued)

The Australian dollar denominated loans (refer to note 23) attract a fixed rate of interest whereas the rand denominated loan bears interest at a floating rate. The following table demonstrates the Group’s sensitivity to a change in interest rates with all other variables held constant, of the Group’s profit before tax (through the impact of floating rate borrowings):

2012 2011Group rm’s Rm’s

+1% 5 4–1% (5) (4)

The Company is not sensitive to fluctuations in interest rates.Full details of interest rates relating to borrowings are detailed in note 23.

foreign currency riskAs the Group operates in various countries and undertakes transactions denominated in foreign currencies, exposures to foreign currency fluctuations arise.

Approximately 15% (2011: 16%) of cost of sales are denominated in the currencies other than the Group’s functional currency. The Group requires all of its operating units to use forward currency contracts to eliminate the currency exposures on any individual transaction for which payment is anticipated on terms after the Group has entered into a firm commitment for a purchase, for which no letter of credit has been issued. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy not to enter into forward contracts until a firm commitment is in place.

It is the Group’s policy not to apply hedge accounting, or to trade in derivatives.

Forward exchange contracts outstanding at the reporting date all fall due within four months (2011: three months), have a settlement value of R12 million (2011: R12 million) and are denominated in euros with average exchange rates of R10,65: €1 (2011: R9,96: €1 and R6,83: US$1).

Exchange rates utilised to convert financial information are as follows:

2012 2011Weighted

average ratefor the year

closingrate

Weightedaverage ratefor the year

Closingrate

ZAR: Australian $ 7,99:1 8,40:1 6,90:1 7,24:1ZAR: Botswana pula 1,05:1 1,06:1 1,03:1 1,04:1ZAR: Euro 10,38:1 10,45:1 9,53:1 9,82:1ZAR: Kenyan shilling 0,09:1 0,10:1 0,08:1 0,07:1ZAR: US$ 7,75:1 8,27:1 6,99:1 6,83:1



foreign currency risk (continued)The exposure and concentration of the Group’s foreign currency risk is included in the table below.

south african

randaustralian

dollar euro us dollar other* totalrm’s rm’s rm’s rm’s rm’s rm’s

2012financial assetsInvestments — — 4 — — 4Trade and other receivables 88 3 26 1 8 126Cash and cash equivalents 832 6 11 31 37 917

financial liabilitiesInterest-bearing loans and borrowings (300) (41) — — — (341)Trade and other payables (174) (9) (28) (2) (11) (224)

2011financial assetsInvestments — — 4 — — 4Trade and other receivables 100 2 25 1 7 135Cash and cash equivalents 712 20 9 60 38 839

financial liabilitiesInterest-bearing loans and borrowings (300) (31) — — — (331)Trade and other payables (177) (6) (26) # (8) (217)

#Less than R1 million.*Other includes the Botswana pula, Kenyan shilling, Namibian dollar, Zambian kwacha and the Lesotho loti.

The Company has no exposure to foreign currency risk.

No foreign currency sensitivity analysis has been prepared, as at this stage the Group profit’s sensitivity to fluctuations in foreign currency exchange rates is not significant. This assessment will be revisited in future.




33. financial risK ManaGeMent oBJectiVes and policies (continued)credit riskCredit risk arises from the risk that a counterparty may default or not meet its obligations timeously.GroupThe Group trades only with recognised, creditworthy parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures, and, where appropriate, credit guarantee insurance is purchased. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. The maximum exposure is the carrying amount as disclosed in note 19. There is no significant concentration of credit risk within the Group.With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents and available-for-sale financial investments, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments, as disclosed in note 20.CompanyWith respect to credit risk arising from the cash and cash equivalents trade and other receivables, BEE loans and preference shares, the Company’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments, as disclosed in notes 14.1, 15 and 20. There is no provision for bad debts against this balance and no impairments recorded, other than those disclosed.

liquidity riskGroupThe Group monitors its risk to a shortage of funds arising by using a recurring liquidity planning tool. This tool considers the maturity of both its financial liabilities and financial assets and projected cash flows from operations.Adequate cash reserves are invested in a dividend income fund in order to match the repayment profile of the secured rand loan.The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and finance leases.In terms of the Memorandum of Incorporation, the Company’s borrowing powers are unlimited.The table below summarises the maturity profile of the Group’s financial liabilities at year end based on contractual undiscounted payments.

on demandless than3 months

3 to12 months 1 to 5 years > 5 years total

Year ended 30 June 2012 rm’s rm’s rm’s rm’s rm’s rm’s

Interest-bearing loans and borrowings — 6 42 318 — 366Trade and other payables — 224 — — — 224

— 230 42 318 — 590

On demandLess than3 months

3 to12 months 1 to 5 years > 5 years Total

Year ended 30 June 2011 Rm’s Rm’s Rm’s Rm’s Rm’s Rm’s

Interest-bearing loans and borrowings — 6 27 325 — 358Trade and other payables — 217 — — — 217

— 223 27 325 — 575

The Group has cash and cash equivalents of R917 million (2011: R839 million), and unutilised credit facilities of R45 million (2011: R45 million) in respect of which all conditions precedent had been met.CompanyThe Company monitors its risk to a shortage of funds arising by using a recurring liquidity planning tool. This tool considers the maturity of both its financial liabilities and financial assets and projected cash flows from investments.

In terms of the Memorandum of Incorporation the Company’s borrowing powers are unlimited.

The Company has cash and cash equivalents of R4,1 million (2011: R1,4 million), and no credit facilities. All liabilities are current.capital managementGroupThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure (equity attributable to the equity holders) and makes adjustments to it, in light of changes in economic conditions.

To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made to the objectives, policies or processes during the year ended 30 June 2012 and 2011.

The Group’s business model is such that the operations ensure a consistent cash flow. This source is used to find expansion and business growth. In addition, R300 million financing raised by the Group in 2008, which was due for settlement on 9 July 2011 was rolled over with terms as disclosed in note 23.



The Group monitors capital using a gearing ratio which is defined as interest-bearing debt and borrowings as a percentage of equity attributable to the equity holders of the parent.

2012rm’s

2011Rm’s

Interest-bearing debt and borrowings 341 331Equity attributable to the equity holders of the parent 1 931 1 637Gearing ratio (%) 18 20

In addition, consideration is given to Black Economic Empowerment, or BEE. The Group finalised a BEE transaction to sell 10,7% of the Group’s ordinary share capital to a BEE consortium which includes Italtile’s black staff. All conditions precedent were met on 22 February 2008 and 88 000 000 ordinary shares were issued. The BEE transaction fulfils an important component of Italtile’s BEE strategy which was initiated with enterprise development and the introduction of black-owned franchisees, following which the Group met all its employment equity targets. With the achievement of these key elements of broad-based BEE, the Group is now well positioned to access segments of the market from which it was previously precluded.

Refer to note 6 for disclosure relating to the modification of the BEE transaction.

CompanyThe primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy ratios in order to support its business and maximise shareholder value.

The Company manages its capital structure (equity attributable to the equity holders) and makes adjustments to it, in light of changes in economic conditions.

To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made to the objectives, policies or processes during the year ended 30 June 2012 and 2011.

The Company monitors capital using liquidity ratio analysis:2012rm’s

2011Rm’s

Current assets (excluding loans to subsidiaries) 4 2Current liabilities (excluding loans from subsidiaries) 3 2Current ratio (times) 1,3 1,0

In addition, consideration is given to Black Economic Empowerment, or BEE as disclosed above.

34. related partY transactionsGroupThe Group is controlled by Rallen (Pty) Limited which owns 53,9% (2011: 53,9%) of its issued share capital. The Group purchases product from Rallen (Pty) Limited’s subsidiary, Ceramic Industries Limited, and its associate Ezee Tile. In addition, the Company pays Rallen (Pty) Limited for directors’ remuneration.

Other related parties listed are related due to the sharing of key management personnel.

All related-party transactions are concluded at arm’s length. Outstanding balances at year end are unsecured, interest-free and settlement occurs in cash on 30-day terms. There have been no guarantees provided or received for any related-party receivables or payables. For the year ended 30 June 2012, the Group has not made any provision for doubtful debts relating to amounts owed by related parties (2011: Rnil) nor incurred any bad debt expense in the current year (2011: Rnil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Details of related-party transactions are as follows:

Aggregate value of transactions

Balances owing at year end

Related partyNature of transactions

2012rm’s

2011Rm’s

2012rm’s

2011Rm’s

Ceramic Industries Limited Inventory purchases 397 332 22 16Ezee Tile Inventory purchases 114 88 9 8Rallen (Pty) Limited Management fees 1 1 # #

Key management personnel comprise only the Board of Directors. Remuneration paid to key management personnel of the Group is therefore detailed in the directors’ report (refer to pages 62 and 63). No balances were owing at year end (2011: nil).





34. related partY transactions (continued)CompanyThe Company owns 100% of the issued share capital of Italtile Ceramics Limited and receives dividends and management fees from its subsidiary.

The Company receives preference share dividends from Four Arrow Investments 256 (Pty) Limited and Arrow Creek Investments 74 (Pty) Limited. These are special purpose entities set up as part of the BEE transaction.

The Company receives interest from the loan to the Italtile Empowerment Trust. This entity was set up by the Company’s Board of Directors as part of the BEE transaction. No interest has been received or accrued as no shares have been issued by the Italtile Empowerment Trust as yet.

All related-party transactions are concluded at arm’s length. There have been no guarantees provided or received for any related-party receivables or payables. For the year ended 30 June 2012, the Company has not made any provision for doubtful debts relating to amounts owed by related parties (2011: Rnil) nor incurred any bad debt expense in the current year (2011: Rnil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Details of related-party transactions are as follows:Aggregate valueof transactions

Balance owingat year end

2012 2011 2012 2011Related party Nature of transactions rm’s Rm’s rm’s Rm’s

Arrow Creek Investments 74 (Pty) Limited Preference share dividends 3 3 94 94Four Arrows Investments 256 (Pty) Limited Preference share dividends 5 4 124 124

Italtile Empowerment Trust Interest — — 66 70Italtile Ceramics Limited Dividends and management fees 139 5 454 450

Refer to notes 6, 14, 15 and 19 for further disclosure relating to terms of balances owing at year end.

Key management personnel comprise only the Board of Directors. Remuneration paid to key management personnel of the Company is therefore detailed in the Directors’ report (refer to pages 62 and 63). No balances were owing at year end (2011: nil).

35. seGMent reportIFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision-maker in order to allocate resources to the segments and to assess their performance. The chief operating decision-maker has been identified as the Board of Directors.On this basis, the Group has four operating segments:segment nature of businessRetail – Retailers of tiles, taps, laminate flooring, sanitaryware and accessories.Franchising – Bearer of South African and non-South African trademarks.Properties – Property investments.Supply and support services – Distributor of taps, laminate flooring, accessories, and tiling tools.

– Group administration and management services. – Outsourced debtor solutions. – Aircraft charter. – Procurement.

All intersegmental transactions are concluded at arm’s length.


35. seGMent report (continued)The following measures, as included in the quarterly management report reviewed by the chief decision-makers, are used to assess performance:

Income measures (Rm’s) retail franchising properties

supply and

support services

inter- group

eliminations Group

2012Turnover 1 451 — — 939 (545) 1 845

Gross margin 535 — — 105 — 640Other income* 20 207 192 111 (210) 320Overheads (467) (94) (44) (42) 210 (437)

Trading profit 88 113 148 174 — 523

2011Turnover 1 190 — — 684 (353) 1 521

Gross margin 452 — — 88 — 540Other income* 15 174 160 108 (171) 286Overheads (390) (87) (33) (39) 171 (378)

Trading profit 77 87 127 157 — 448

*Other income includes franchise fees, rentals, royalties and rebates received, as well as profit or loss on disposal of property, plant and equipment.

Asset measures (Rm’s) retail franchising properties

supply and

support services

provisions and

inter- group

eliminations Group

2012Inventory 239 — — 156 (56) 339Trade receivables # 15 20 109 (43) 101

2011Inventory 164 — — 127 (50) 241Trade receivables 6 13 20 93 (31) 101


Geographical segment information has not been disclosed as adequate information in this regard is not readily available and preparation thereof would entail undue cost and effort.

36. suBsequent eVentsRefer to page 64 of the directors’ report for details of subsequent events relating to:• Offer to Ceramic Industries Limited• Black Economic Empowerment transaction


Subsidiaries

Book value of interest

Issued share capital

% held Shares Amounts owing to

2012 2011 2012 2011 2012 2011R rm’s Rm’s rm’s Rm’s

held by italtile limitedretailinGItaltile Ceramics Limited 36 383 670 100 100 1 1 454 450

Issued share capital

Effective % shareholding

2012r

2011R

2012 2011

held by subsidiariesfranchisinGItaltile Franchising (Pty) Limited 1 000 1 000 100 100Italtile (Franchising) Pty Limited9 4 4 66 66Italtile Mauritius (Pty) Limited1 1 589 1 589 100 100propertY inVestMentAllmuss Properties (Pty) Limited 1 500 1 500 100 100Allmuss (Botswana) (Pty) Limited2 4 651 4 651 100 100Allmuss Properties Namibia (Pty) Limited3 1 100 1 100 100 100Allmuss Lesotho (Pty) Limited4 1 000 1 000 100 100Allmuss Properties Kenya Limited5 4 108 4 108 100 100Allmuss Properties (Uganda) Limited6 5 825 590 5 825 590 55 55Allmuss Properties Zambia Limited7 188 600 188 600 55 55Emerald Sky Trading 736 (Pty) Limited 100 100 100 100F. B. Ashman (Pty) Limited 100 100 100 100Penates Logistics (Pty) Limited 100 100 100 100Magnolia Ridge Properties 291 (Pty) Limited 15 000 000 15 000 000 50 50Melkbos Pty Limited9 7 346 541 83Norstrom Pty Limited9 9 149 000 9 149 000 66 66support serVicesCladding Finance (Pty) Limited 100 100 100 100Earlyworks 191 (Pty) Limited — 100 — 100International Tap Distributors (Pty) Limited 210 210 71 79Majuba Aviation (Pty) Limited 12 339 876 12 339 876 100 100Ser Export s.p.a.8 37 546 37 546 53,5 53,5Cedar Point Trading 326 (Pty) Limited 1 000 1 000 55 55retailinGCeramic Tile Projects (Pty) Limited 100 100 40 40CTM Kenya Limited5 3 446 3 446 100 100Italtile Australia Pty Limited9 57 849 956 57 849 956 66 66Italtile Floorings Pty Limited9 80 591 80 591 66 66Italtile Retail (Pty) Limited 1 000 1 000 55 55Orban Investments 375 (Pty) Limited3 175 175 100 100TopT Ceramics (Pty) Limited 1 000 1 000 80 80

1 Incorporated in Mauritius. 6 Incorporated in Uganda.2 Incorporated in Botswana. 7 Incorporated in Zambia.3 Incorporated in Namibia. 8 Incorporated in Italy (joint venture).4 Incorporated in Lesotho. 9 Incorporated in Australia.5 Incorporated in Kenya.


Analysis of shareholders

Category of shareholderNumber of

shareholdersNumber of

shares heldShares held

%

The Italtile Empowerment Trust 1 26 400 000 2,5The Italtile Share Incentive Scheme 1 26 290 909 2,5Empowerment companies 2 61 600 000 6,0Individuals 370 62 392 701 6,1Nominee shareholders 55 62 964 485 6,1Companies and other corporate bodies 130 189 317 547 18,3Directors 3 27 733 488 2,7Associates to directors 2 576 633 692 55,8

total 564 1 033 332 822 100,0

Concentration of holdings – number of shares

Number of shareholders

Number of shares held

Shares held %

1 – 5 000 242 389 662 0,04 5 001 – 20 000 109 1 137 739 0,11 20 001 – 100 000 96 4 780 434 0,46 100 001 – 1 000 000 68 28 244 946 2,73

Over 1 000 000 49 998 780 041 96,66

total 564 1 033 332 822 100,0


Shareholders’ spread

Category of shareholderNumber of

shareholdersNumber of

shares heldShares held

%

Directors 3 27 733 488 2,7Associates to directors 2 576 633 692 55,8The Italtile Share Incentive Trust 1 26 290 909 2,5The Italtile Empowerment Trust 1 26 400 000 2,5Empowerment companies 2 61 600 000 6,0

Total non-public shareholders 9 718 658 089 69,5Public shareholders 555 314 674 733 30,5

total 564 1 033 332 822 100,0

Major shareholdersNumber of

shares held

% interest in the issued share capital

Rallen (Pty) Limited 556 536 030 53,9Old Mutual Group 105 200 683 10,2Tommaso Altini Trust 37 614 201 3,6Four Arrows Investments 256 (Pty) Limited# 35 200 000 3,4

#BEE Special Purpose Entities.


Italtile Group Owned Stores South Africa

Boksburg

Corner Jan Smuts and Loizides Avenue, Bardene, BoksburgPO Box 1689 Randburg 2125Tel: (011) 255-1060/61Fax: (011) 255-1099

Bryanston, Johannesburg

Corner William Nicol Driveand Peter PlaceBryanston 2021PO Box 1689, Randburg 2125Tel: (011) 510-9000Fax: (011) 510-9019

Menlyn, pretoria

Adjacent to Menlyn ParkShopping Centre38 Palala RoadAshlea GardensPretoriaPO Box 35232Menlo Park 0102Tel: (012) 348-8700/1/2Fax: (012) 348-3429Fax: 086-518-7947

Montague Gardens, cape town

Italtile BuildingNorthgate Estate BrooklynCape TownPO Box 713Somerset West 7129Tel: (021) 510-7766Fax: (021) 510-7788

nelspruit

18 Rapid StreetRiverside Industrial ParkNelspruit 1200PO Box 13040, Nelspruit 1200Tel: (013) 752-8333Fax: (013) 753-3362

port elizabeth

Corner Roshan Street andN2 Freeway, FramesbyPort ElizabethPO Box 10973Linton Grange 6025Tel: (041) 360-4460Fax: (041) 360-4470

somerset West

Corner N2 and R44 next toSomerset MallSomerset WestP/Bag X15, Postnet Suite 174Somerset West 7129Tel: (021) 851-2170Fax: (021) 852-7790

umhlanga

7 Tetford CrescentUmhlanga RidgeUmhlangaPO Box 2474Mount EdgecombeCountry Club 4301Tel: (031) 566-5069Fax: (031) 566-5090

CTM Group Owned Stores

alberton

Dion Centre, St Austall RoadNew Redruth ExtPO Box 1689, Randburg 2125Tel: (011) 869-0070Fax: (011) 869-0084

Boksburg

Corner Northrand andTrichardt StreetsBoksburg 1459PO Box 1689, Randburg 2125Tel: (011) 918-5858Fax: (011) 894-3782

Brakpan

Corner Nossop and OuhoutStreetsDalpark, Extension 13BrakpanPO Box 1689, Randburg 2125Tel: (011) 915-1754Fax: 086-508-1689

centurion

Highway Business ParkOld Johannesburg RoadRooihuiskraalCenturion 0157PO Box 1689, Randburg 2125Tel: (012) 661-2196/7/8/9Fax: 086-555-0550

dobsonville

301 Roodepoort RoadMmesi ParkDobsonville 1863PO Box 1689, Randburg 2125Tel: (011) 988-6789Fax: (011) 988-6726

east london

Corner Main andFitchett StreetsAmalindaEast LondonPO Box 12836, AmalindaEast London 5252Tel: (043) 741-1360Fax: (043) 741-1369

hermanus

Corner Skulphoek andAdam Roads, SandbaaiHermanusPO Box 1622, SandbaaiHermanus 7200Tel: (028) 313-1199Fax: (028) 313-2928

lonehill

152 Capricorn RoadPaulshof 2062PO Box 1689, Randburg 2125Tel: (011) 467-6357/8Fax: (011) 467-6362

Maun

Next to Adima Hire, BosejaMaunPost Bag 114, Suite 92BotswanaTel: (00267) 686-4478Fax: (00267) 686-4479

Menlyn, pretoria

Adjacent to Menlyn ParkShopping Centre38 Palala RoadAshlea GardensPretoriaPO Box 1689, Randburg 2125Tel: (012) 365-3070/1/2Fax: (012) 365-3080

Montana

Corner Taaifontein andCaliandra RoadsMontana ParkPretoriaPO Box 1689, Randburg 2125Tel: (012) 548-3555Fax: (012) 548-4009

oshikati

Main Road, OngwedivaOshikatiNamibiaPO Box 2958 OshikatiNamibiaTel: (00264) 652-31190Fax: (00264) 652-31176

pietermaritzburg

116 Victoria RoadPietermaritzburg 3201Tel: (033) 342-9701Fax: (033) 342-7330

Branch addresses


Branch addresses continued

port shepstone (south coast)

1 Oscar Nero Road, MarburgPort ShepstonePO Box 2533, Port Shepstone4240Tel: (039) 682-1601Fax: (039) 682-1762

pretoria

Corner Michael Brink Street and Hendrik Verwoerd DriveInnesdalePretoriaPO Box 1689, Randburg 2125Tel: (012) 335-3308Fax: (012) 335-3323

route 24 (edenvale)

198 Herman RoadMeadowdale, EdenvalePO Box 1689, Randburg 2125Tel: (011) 453-0320Fax: (011) 453-7443

somerset West

Somerset West Business Park33 Delson CircleSomerset WestPO Box 224, Somerset West7129Tel: (021) 851-7110Fax: (021) 851-7117

southgate

20 Rifle Range RoadRidgeway (Next to Southgate Mall)SouthgatePO Box 1689, Randburg 2125Tel: (011) 494-4496Fax: (011) 494-5000

springs

3 Lead Road, New EraSpringsPO Box 9410, Elsburg 1407Tel: (011) 817-1336Fax: (011) 813-3922

strijdompark

1 Arbeid StreetStrijdomparkPO Box 1689, Randburg 2125Tel: (011) 792-4136Fax: (011) 792-4138

tembisa

1, Erf 4859, Isimuku StreetBirch Acres ExtTembisaPO Box 1689, Randburg 2125Tel: 084-585-9348Fax: 086-508-1640

umhlanga

7 Tetford CrescentUmhlanga RidgeDurbanPO Box 2474, MountEdgecombeCountry Club 4301Tel: (031) 566-3340Fax: (031) 566-3341

Vaal

Corner Johannesburg andLeeuwenhoek StreetsVereeniging 1930PO Box 1689, Randburg 2125Tel: (016) 422-7353Fax: (016) 422-7350/54

Westgate

Corner C R Swart andOntdekkers RoadsWilroparkPO Box 1689, Randburg 2125Tel: (011) 768-5758/0416/7Fax: (011) 768-1969

Windhoek

Andimba Toivo Ya Toivo No. 3 Krupp Street, Southern IndustriaWindhoekPO Box 40480, Ausspannplatz,WindhoekNamibiaTel: (00264) 612-55318/9Fax: (00264) 612-35479

Worcester

10 Park CloseWorcester 6850PO Box 767, Worcester 6849Tel: (023) 347-4869Fax: (023) 342-4808

CTM Group Owned Stores – Rest of Africa

KenYa

Mombasa

Malindi RoadPlot MN1/301/3102NyaliMombasaKenyaPO Box 95787, KenyaTel: (00254) 2020-38528/9Fax: (00254) 2020-38526

nairobiNg’ong Road, opposite Ng’ong Hills HotelPO Box 718 – 005202Nairobi, KenyaTel: (00254) 20-2420775Fax: (00254) 735-177700

CTM Franchise Stores South Africa

Bethlehem

Muller Street East 19Hospital roadsBethlehem 9701PO Box 2638Bethlehem 9700Tel: (058) 303-0065/6Fax: (058) 303-8517

Bloemfontein

Corner Curie and Pasteur Avenue, ShowgatePO Box 34654, Faunasig Bloemfontein 9325Tel: (051) 430-4967Fax: (051) 447-7532Fax: 086-508-1638

Botshabelo

No. 1 Blue StreetBotshabelo 9781PO Box 34654, FaunasigBloemfontein 9325Tel: (051) 534-8899Fax: (051) 534-8991Fax: 086-508-1639

Brackenfell

Paradys StreetBrackenfell 7560PO Box 3974, Durbanville 7551Tel: (021) 981-4576Fax: (021) 981-6750

Brits

Hendrik Verwoerd AvenueBrits 0250Postnet Suite 160Private Bag X0001Ifafi 0260Tel: (012) 250-3034/66Fax: 086-508-1655

Burgersfort

281 Kastania StreetBurgersfort 1150PO Box 1689, Randburg 2125Tel: (013) 231-7968Fax: (013) 231-7687

durban

41B Intersite AvenueUmgeni Business ParkSpringfieldPO Box 203, Umgeni 4098Tel: (031) 263-1470/2/3Fax: (031) 263-1475

empangeni

Corner John Ross andTanner RoadEmpangeni 3880PO Box 8696, Empangeni Station 3901Tel: (035) 772-5250/1Fax: (035) 772-5253

George

Corner Knysna Road andFourth StreetGeorge East 6529PO Box 12231, Garden Route Mall, George 6546Tel: (044) 871-1021/2Fax: (044) 871-1048

Groblersdal

9 Eind Street CornerVan Riebeck and CanalPO Box 1641Groblersdal 0470Tel: (013) 262-5416Fax: (013) 262-3976


Kimberley

Pniel Road No 7Kimberley 8301PO Box 194, Kimberley 8301Tel: (053) 831-4230Fax: (053) 831-4232

Klerksdorp

Corner Bishop Desmond Tutu and Jo SlovoKlerksdorp 2571PO Box 966, Klerksdorp 2570Tel: (018) 464-1222/1999Fax: 086-576-6105

ladysmith

83A Murchison StreetLadysmith 3370PO Box 1689, Randburg 2125Tel: (036) 631-0056/7Fax: (036) 631-1619

louis trichardt

No. 1 Makhado CrossingCorner Limpopo andCommercial RoadLouis TrichardtPO Box 4200,Louis Trichardt 0920Tel: (015) 516-2779/0279Fax: (015) 516-2777

Mafikeng

Shop No 2Midway Business ParkNewton StreetMafikeng 2745PO Box 23274, Mafikeng 2745Tel: (018) 381-1073/0509Fax: (018) 381-0504

Middelburg (Mpumalanga)

No 25 Meyer StreetMiddelburgPO Box 830, Middelburg 1050Tel: (013) 282-2420/30Fax: (013) 282-2425

Mokopane (potgietersrus)

43 Thabo Mbeki StreetPotgietersrusMokopanePO Box 4749, Mokopane 0600Tel: (015) 491-1368Fax: (015) 491-3912

Montague Gardens

Koeberg RoadMontague Gardens 7945PO Box 1179, Milnerton 7435Tel: (021) 552-2999Fax: (021) 552-3049

Mossel Bay

8 Bolton Road, VoorbaaiMossel BayPO Box 2058, Mossel Bay 6500Tel: (044) 695-1141Fax: (044) 695-0284

Mthatha (umtata)

73 Nelson Mandela DriveUmtataPO Box 52550, Umtata 5099Tel: (047) 532-6850Fax: (047) 532-6868 Fax: 086-622-7652

nelspruit

18 Rapid StreetRiverside Industrial ParkNelspruit 1200PO Box 3171, Nelspruit 1200Tel: (013) 755-2006Fax: (013) 755-1434

newcastle

Allen StreetNewcastlePO Box 20543, Newcastle 2940Tel: (034) 315-5145/6Fax: (034) 315-5147

northgate

8 Gold StreetNorthgate Business ParkYster PlaatPO Box 1179, Milnerton 7435Tel: (021) 510-3307Fax: (021) 510-6761

paarl

Corner Textile andLady Grey StreetsPaarl 7646PO Box 1689, Randburg 2125Tel: (021) 871-1902/3/4Fax: (021) 871-1907

phuthaditjhaba

Factory 115, Mohale StreetPhuthaditjhaba Area 3Tel: (058) 713-6183/93Fax: (058) 713-6178

pinetown

56 Old Main RoadPinetownPO Box 1924, Westville 3630Tel: (031) 702-3701Fax: (031) 702-3706

polokwane (pietersburg)

64 Hoof Street, SuperbiaPolokwanePO Box 31281, Superbia 0759Tel: (015) 292-0001/5Fax: (015) 292-1529

port elizabeth

1 Archie CloseCorner Chase Drive and Keeton StreetYoung Park, Port ElizabethPO Box 3788, NorthendPort Elizabeth 6056Tel: (041) 456-4691Fax: (041) 456-4683

potchefstroom

18 Poortmain StreetPotch IndustriaPO Box 1660, Potchefstroom2520Tel: (018) 294-3011/12Fax: (018) 294-3013

prospecton

2 B Prospecton RoadProspecton, DurbanPO Box 26311Isipingo Beach 4115Tel: (031) 902-9230Fax: (031) 902-9234

queenstown

123 Cathcart RoadQueenstown 5320PO Box 687, Queenstown 5320Tel: (045) 838-5376/7/8Fax: (045) 838-5011

rustenburg

8 Korokoro StreetWaterfall EastPostnet Suite 4529Private Bag X82323Rustenburg 0300Tel: (014) 592-1205/6/7Fax: (014) 592-1203Fax: 086-508-1694

secunda

Erf 8512, Manie Maritz StreetPO Box 6985, Secunda 2302Tel: (017) 631-5102Fax: (017) 631-5105

thohoyandou

102 Main StreetThohoyandou 0950PO Box 1700, Sibasa 0970Tel: (015) 962-5401Fax: (015) 962-5462

tokai

Corner Vans and Tokai RoadsTokai 7945Tel: (021) 715-8506Fax: (021) 715-8569

tzaneen

Corner Sapekoe Avenue andClaude Wheadly DriveTzaneenPO Box 1297, Tzaneen 0850Tel: (015) 307-4039/44Fax: (015) 307-4049

upington

Corner Le Roux andSwartmodder StreetsUpington 8801PO Box 1735, Upington 8800Tel: (054) 331-2577/79Fax: (054) 331-2575

Vredenburg

20 Saldanha RoadVredenburgPO Box 1318Vredenburg 7380Tel: (022) 715-1180/1/2Fax: (022) 715-1105


Branch addresses continued

Vryburg

Corner Stella andMoffat StreetsVryburgPO Box 1093, Vryburg 8600Tel: (053) 927-6875/3591Fax: (053) 927-6876

Welkom

Corner Koppie Alleen andConstantia RoadsPO Box 98, Welkom 9460Tel: (057) 396-3371/2Fax: (057) 396-4818

Witbank

No. 2 Vanderbijl StreetWitbankPO Box 13150, Leraatsfontein1035Tel: (013) 690-2874/6Fax: (013) 690-2878

Rest of Africa

CTM Franchise Stores

naMiBia

swakopmund

Moses-Garoeb StreetSwakopmundPO Box 2196, SwakopmundNamibia 9000Tel: (00264) 644-64148Fax: (00264) 644-64124

lesotho

Maseru

Plot No 12282-077Moshoeshoe RoadIndustrial Area, MaseruLesothoPrivate Bag A248, MaseruLesotho 0100Tel: (00266) 22-327-457Fax: (00266) 22-327-458

uGanda

Kampala

Plot 171/177, 6th StreetIndustrial AreaKampalaPO Box 25202, Kampala UgandaTel: (00256) 312-261-888Fax: (00256) 312-261-889

sWaziland

Matsapha

No. 3 King Maswati Third AvenueMatsapha, SwazilandPO Box 1095, MatsaphaSwazilandTel: (00268) 518-4061Fax: (00268) 518-4048

Mbabane

Plot 940, Mshini RoadSidwashini, MbabanePO Box 1095, MatsaphaSwazilandTel: (00268) 422-1720Fax: (00268) 518-4048

BotsWana

francistown

Plot 31248Somerset IndustrialFrancistownPO Box 1285, FrancistownBotswanaTel: (00267) 241-5590Fax: (00267) 244-0065

Gaborone

Plot 22077, Ditsotswane Road,GaboroneWest IndustrialBotswanaPO Box 25033, GaboroneBotswanaTel: (00267) 393-3770Fax: (00267) 393-3771

palapye

Plot 304, New Industrial SitesPalapyePO Box 11791, Pota, PalapyeBotswanaTel: (00267) 490-0430Fax: (00267) 490-0429

tanzania

arusha – ctM (ea) limited

Shop 6A – TFA Arusha Shopping ComplexPO Box 10802, ArushaTanzaniaTel: (00255) 27-254-8015Fax: (00255) 27-254-8145

dar-es-salaam airport (Main) store – ctM (ea) limited

Plot 115, Nyerere RoadPO Box 79085Dar-es-SalaamTanzaniaTel: (00255) 22-286-3916Fax: (00255) 22-286-5692

dar-es-salaam (Mwenge store) – ctM (ea) limited

Plot 109, Mikocheni LightIndustrial AreaPO Box 79085Dar-es-SalaamTanzaniaTel: (00255) 22-270-0602Fax: (00255) 22-286-5692

australia

sydney – new south Wales

ctM Beresfield

2 Birraba Avenue, BeresfieldNSW2322Tel: (00612) 4966-0166Fax: (00612) 4966-0677

ctM Blacktown

Shop 31 HomebaseShopping Center19 Stoddart Road, ProspectNSW 2148Tel: (00612) 9688-4528Fax: (00612) 9688-4918

ctM Brookvale

1 – 5 West StreetBrookvaleNSW 2100Tel: (00612) 9939-3090Fax: (00612) 9939-3313

ctM West Gosford

297 Manns RoadWest GosfordNSW 2250Tel: (00612) 4322-8377Fax: (00612) 4322-8399

ctM lansvale

286 Hume Highway, LansvaleNSW 2166Tel: (00612) 9724-0141Fax: (00612) 9724-5219

Brisbane – queensland

ctM Burleigh

2 – 4 Rina CourtVarsity LakesQLD 4227Tel: (00617) 5593-5002Fax: (00617) 5593-6627

ctM springwood

3437 Pacific HighwaySlacks CreekQLD 4127Tel: (00617) 3208-3472Fax: (00617) 3208-2918

ctM strathpine

114 Gympie RoadStrathpineQLD 4500Tel: (00617) 3889-8666Fax: (00617) 3889-8142


TopT Group Owned Stores

Benoni

Corner Amphill and Wistead RoadBenoniPO Box 1689, Randburg 2125Tel: (011) 845-3081Fax: (011) 845-3175

lenasia/lawley

Main Lawley Road, LenasiaPO Box 1689, Randburg 2125Tel: (011) 857-1232/1249Fax: (011) 857-1556

nelspruit10 Cameron Street, NelspruitPO Box 1689Randburg, 2125Tel: (013) 752-7036Fax: (013) 752-8359

pretoria WestCrown Court Shop 1 135 Church Street Pretoria WestPO Box 1689Randburg, 2125Tel: (012) 327-4108Fax: (012) 327-4767

roodepoort

Corner Anvil andGranville StreetsRobertvillePO Box 1689, Randburg 2125Tel: (011) 674-2134Fax: (011) 674-3306

tembisa54 Axel Drive Clayville Ext 22, Unit 3, Joston ParkPO Box 1689Randburg, 2125Tel: (011) 316-0107Fax: (011) 316-0087

Vanderbijlpark

Rabie Street, CE6VanderbijlparkPO Box 1689, Randburg 2125Tel: (016) 933-1951/2Fax: (016) 933-1955

Witbank2 Van der Bjl Street, WitbankPO Box 1689Randburg, 2125Tel: (013) 656-5810Fax: (013) 656-9133

TopT Franchise Stores

Giyani

Main Road, Horizon MallGiyaniPO Box 1689, Randburg 2125Tel: (015) 812-1326Fax: (015) 812-3819

Jane furse

105 Mamone RoadJane Furse, 1085PO Box 4749, Mokopane 0600Tel: (013) 265-1971Fax: (013) 265-1978

lichtenburg

Corner Melville and Buchanan Streets Ebenlou BuildingLichtenburgPO Box 1689, Randburg 2125Tel: (018) 632-0604Fax: (018) 632-0605

newcastle

81 Scott StreetNewcastlePO Box 20543, Newcastle 2940Tel: (034) 312-3175Fax: (034) 312-3338

polokwane (pietersburg)

79 Hoof StreetSuperbiaPO Box 31281, Polokwane 0759Tel: (015) 292-3841Fax: (015) 292-3842

rustenburg

115 Leyds StreetPostnet Suite 4529Private Bag X82323Rustenburg 0030Tel: (014) 597-2701Fax: (014) 597-3056

zeerust

Shop 59 Church Street Zeerust, North WestPostnet Suite 4529 P/Bag X82323Tel: (018) 642-1164Fax: (018) 642-1128

Adminstration and offices


transfer secretaries Computershare Investor

Services (Pty) Limited

70 Marshall Street

Johannesburg, 2001

sponsor KPMG Services (Pty) Limited

legal advisers Derek H Rabin & Associates

(Pty) Limited and

Routledge Modise in Association

with Eversheds

Bankers Nedbank Limited

auditors Ernst & Young Inc.

Website http://www.Italtile.com

italtile liMited

Incorporated in the Republic of South Africa

Listed on the JSE Limited

registration number 1955/000558/06

Jse share ITE

isin code ZAE000099123

company secretary E J Willis

registered office The Italtile Building

Cnr William Nicol Drive and

Peter Place

Bryanston, 2021

postal address PO Box 1689, Randburg, 2125

telephone number +27 (0) 11 510 9050

fax number +27 (0) 11 510 9061

Shareholders’ diary


financial Year end June

annual General MeetinG November

reports

Interim half-year to December February

Preliminary profit announcement August

Integrated annual report September

diVidends

Interim dividend Declared February

Paid March

Final dividend Declared August

Paid September


this document is important and requires your immediate attention.

if you are in any doubt as to the action you should take, please consult your central securities depository participant (“csdp”), broker, banker, legal adviser, accountant or other professional adviser immediately.

It should be noted that the record date in terms of section 59 of the Companies Act for Italtile shareholders to be recorded on the register in order to receive notice of the annual general meeting (“AGM”) is Friday, 21 September 2012.

Notice is hereby given that the 23rd AGM of shareholders of Italtile will be held at Zenzele Park, cnr Likkewaan and Dr Vosloo Streets, Bartlett Ext 40, Boksburg, on Friday, 23 November 2011 at 11:00, for the following purposes:

The record date for determining which Italtile shareholders are entitled to participate in and vote at the AGM is Friday, 16 November 2012. Accordingly, the last day to trade in order to be on the register on the record date to participate and vote at the AGM shall be Friday, 9 November 2012.

ordinarY Business

To receive the integrated annual report for the year ended 30 June 2012 of the Company and the Group, together with the reports of the directors and auditors.

ordinary resolution no 1 – election of directors who retire by rotation

1.1 RESOLVED THAT Mr S I Gama, who is retiring by rotation in terms of the Memorandum of Incorporation of the Company and, being eligible, offers himself for re-election, be and is hereby re-elected as a director of the Company.

1.2. RESOLVED THAT Ms A Zannoni, who is retiring by rotation in terms of the Memorandum of Incorporation of the Company and, being eligible, offers herself for re-election, be and is hereby re-elected as a director of the Company.

A brief curriculum vitae in respect of these directors is contained on page 55 of this integrated annual report.

ordinary resolution no 2 – appointment of auditors

THAT Ernst & Young Inc. be and are hereby reappointed as independent auditors of the Company and Sarel Strydom, being a director of Ernst & Young Inc., be and is hereby appointed as the individual registered auditor who will undertake the audit of the Company for the ensuing period terminating on the conclusion of the next AGM of the Company.

ordinary resolution no 3 – audit and risk committee

THAT, in terms of Section 94(2) of the Companies Act No 71 of 2008, as amended (“the Act”) the following independent non-executive directors be and are hereby appointed as members of the Company’s Audit and Risk Committee, subject to the re-election of Mr Gama as a director in terms of resolution 1.1 above: S M du Toit (Chairman), S I Gama and S G Pretorius.

ordinary resolution no 4 – non-binding advisory vote on the company’s remuneration policy

THAT the Company’s remuneration policy as detailed on pages 48 to 49 of this integrated annual report be and is hereby approved and adopted.

The reason for proposing this resolution is to request shareholders to signify their approval of the Company’s remuneration policy by way of a non-binding advisory resolution as is provided for in the King Report on Governance for South Africa – 2009 (“King III”).

ordinary resolution no 5 – unissued shares to be placed under the control of the directors

THAT the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control and authority of the directors of the Company and that the directors be and are hereby authorised and empowered to allot and issue all or any of such ordinary shares to such person or persons on such terms and conditions and at such times as the directors may from time to time in their discretion deem fit, subject to the proviso that the aggregate number of shares to be allotted and issued in terms of this resolution shall be limited to 15% (fifteen percent) of the authorised share capital and subject to the provisions of the Act and the Listings Requirements of JSE Limited (“JSE”) (“the Listings Requirements”).

ordinary resolution no 6 – General authority to issue shares, and to sell treasury shares, for cash

THAT the directors of the Company and/or any of its subsidiaries from time to time be and they are hereby authorised, by way of a general authority, to:

c allot and issue shares or options in respect of all or any of the authorised but unissued ordinary shares in the capital of the Company; and/or

c sell or otherwise dispose of or transfer, or issue any options in respect of, ordinary shares in the capital of the Company purchased by subsidiaries of the Company,

Notice to shareholders

italtile limited

(Incorporated in the Republic of South Africa)

(Registration No 1955/000558/06)

(“the Company” or “Italtile”)

JSE code: ITE

ISIN code: ZAE000099123


c any repurchase of securities must be effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company and the counterparty;

c at any point in time, the Company may only appoint one agent to effect any repurchase on the Company’s behalf;

c this general authority be valid until the Company’s next AGM, provided that it shall not extend beyond 15 (fifteen) months from the date of passing of this special resolution (whichever period is shorter);

c an announcement be published as soon as the Company has cumulatively repurchased 3% (three percent) of the initial number (the number of that class of share in issue at the time that the general authority is granted) of the relevant class of securities and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, containing full details of such repurchases;

c repurchases by the Company, and/or its subsidiaries, in aggregate in any one financial year may not exceed 20% (twenty percent) of the Company’s issued share capital as at the date of passing this special resolution or 10% (ten percent) of the Company’s issued share capital in the case of an acquisition of shares in the Company by a subsidiary of the Company;

c the Board of Directors of the Company (“the Board”) pass a resolution that they have authorised the repurchase, that the Company passed the solvency and liquidity test and that since the test was done there have been no material changes to the financial position of the Group;

c repurchases may not be made at a price greater than 10% (ten percent) above the weighted average of the market value of the securities for the 5 (five) business days immediately preceding the date on which the transaction was effected; and

c repurchases may not be undertaken by the Company or one of its wholly owned subsidiaries during a prohibited period.

The reason for the passing of the above special resolution is to grant the Company a general authority in terms of the Act for the acquisition by the Company or any of its subsidiaries of securities issued by the Company, which authority shall be valid until the earlier of the next AGM, or the variation or revocation of such general authority by special resolution by any subsequent general meeting of the Company; provided that the general authority shall not extend beyond 15 (fifteen) months from the date of this general meeting. The passing and registration of this special resolution will have the effect of authorising the Company or any of its subsidiaries to acquire securities issued by the Company.

for cash, to such person/s on such terms and conditions and at such times as the directors in their discretion deem fit, subject to the Act, the Memorandum of Incorporation of the Company, the Listings Requirements and the following limitations:

c The securities which are the subject of the issue for cash must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue.

c Any such issue may only be made to public shareholders as defined by the Listings Requirements and not to related parties.

c The number of ordinary shares issued for cash shall not in any 1 (one) financial year in the aggregate exceed 15% (fifteen percent) of the number of issued ordinary shares, including instruments which are convertible into ordinary shares. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares issued during the current financial year, provided that any ordinary shares to be issued pursuant to a rights issue (announced, irrevocable and underwritten) or acquisition (which has had final terms announced) may be included as though they were in issue at the date of application.

c This general authority is valid until the earlier of the Company’s next AGM or expiry of a period of 15 (fifteen) months from the date that this authority is given.

c A published announcement giving full details, including the impact on the net asset value per share, net tangible asset value per share, earnings per share and headline earnings per share, will be published when the Company has issued ordinary shares representing, on a cumulative basis within 1 (one) financial year, 5% (five percent) or more of the number of ordinary shares in issue prior to the issue.

c In determining the price at which an issue of ordinary shares may be made in terms of this authority, the maximum discount permitted will be 10% (ten percent) of the weighted average traded price on the JSE of the ordinary shares over the 30 (thirty) business days prior to the date that the price of the issue is determined or agreed by the directors of the Company.

c Whenever the Company wishes to use ordinary shares, held as treasury stock by a subsidiary of the Company, such use must comply with the Listings Requirements as if such use was a fresh issue of ordinary shares.

In terms of the Listings Requirements a 75% (seventy-five percent) majority of the votes cast by shareholders present or represented by proxy at the general meeting must be cast in favour of ordinary resolution number 6 for it to be approved.

special resolution no 1 – acquisition of own securities

THAT the mandate be given to the Company (or any of its wholly owned subsidiaries) providing authorisation, by way of a general approval, to acquire the Company’s own securities, upon such terms and conditions and in such amounts as the directors may from time to time decide, but subject to the Memorandum of Incorporation of the Company, the provisions of the Act and the Listings Requirements provided that:

Notice to shareholders continued


c the working capital available to the Company and its subsidiaries will be sufficient for the Group’s requirements for a period of 12 (twelve) months after the date of the AGM; and

c the Company will provide its sponsor and the JSE with all documentation as required in Schedule 25 of the Listings Requirements, and will not commence any repurchase programme until the sponsor has signed off on the adequacy of its working capital, advised the JSE accordingly and the JSE has approved this documentation.

special resolution no 2 – financial assistance to related and inter-related entities

THAT the Board may, subject to compliance with the requirements of the Memorandum of Incorporation of the Company and the Act, authorise the provision by the Company, at any time and from time to time during the period of 2 (two) years commencing on the date of adoption of this special resolution, of direct or indirect financial assistance, by way of a loan, guarantee of a loan or other obligation or the securing of a debt or other obligation to any one or more related or interrelated companies or corporations of the Company and/or to any one or more members of any such related or inter-related company or corporation related to any such company or corporation as outlined in section 2 of the Act, on such terms and conditions as the Board may deem fit.

The reason for the passing of this special resolution is that, on a strict interpretation of section 45 of the Act, the Company may not provide the financial assistance contemplated in such section without a special resolution. The above resolution gives the Board the authority to authorise the Company to provide direct or indirect financial assistance, by way of a loan, guaranteeing of a loan or other obligation or securing of a debt or other obligation, to the recipients contemplated in special resolution number 1.

It is difficult to foresee the exact details of financial assistance that the Company may be required to provide over the next two years. It is essential, however, that the Company is able to organise effectively its internal financial administration. For these reasons and because it would be impractical and difficult to obtain shareholder approval every time the Company wishes to provide financial assistance as contemplated above, it is necessary to obtain the approval of shareholders, as set out in special resolution number 2.

It should be noted that this resolution does not authorise financial assistance to a director or a prescribed officer or any company or person related to a director or prescribed officer.

The following information, which is required by the Listings Requirements with regard to the resolution granting a general authority to the Company to repurchase securities, appears on the pages of the integrated annual report to which this notice of general meeting is annexed, is indicated below:

Directors of the Company page 55

Major shareholders page 102

Directors’ interests in securities page 62

Share capital of the Company page 89

Responsibility statement page 60

Material changes page 113

There are no legal or arbitration proceedings, either pending or threatened against the Company or its subsidiaries, of which the Company is aware, which may have, or have had in the last 12 (twelve) months, a material effect on the financial position of the Company or its subsidiaries.

stateMent BY the Board of the coMpanY pursuant to and in terMs of the listinGs requireMents:

The directors of the Company hereby state that:

(a) the intention of the directors of the Company is to utilise the authority if, at some future date, the cash resources of the Company are in excess of its requirements. In this regard the directors will take account of, inter alia, an appropriate capitalisation structure for the Company, the long-term cash needs of the Company and will ensure that any such utilisation is in the interests of the shareholders; and

(b) the method by which the Company intends to repurchase its securities and the date on which such repurchase will take place, has not yet been determined.

At the time that the contemplated repurchase is to take place, the directors of the Company will ensure that:

c the Company and its subsidiaries will be able to pay their debts as they become due in the ordinary course of business for a period of 12 (twelve) months after the date of the AGM;

c the consolidated assets of the Company and its subsidiaries, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the consolidated liabilities of the Company and its subsidiaries for a period of 12 (twelve) months after the date of the AGM;

c the issued share capital and reserves of the Company and its subsidiaries will be adequate for the purpose of the business of the Company and its subsidiaries for a period of 12 (twelve) months after the date of the AGM;


Material chanGe

Other than the facts and developments reported in this integrated annual report, there have been no material changes in the affairs, financial or trading position of the Company since the signature date of this integrated annual report and the posting date thereof. Shares held by the Company as treasury shares and the Italtile Share Incentive Trust will be excluded from the quorum and voting on the resolutions commissioned at the AGM.

VotinG and proxies

A shareholder entitled to attend and vote at the AGM is entitled to appoint a proxy or proxies to attend, speak and vote in his or her stead. A proxy need not be a shareholder of the Company. For the convenience of registered shareholders of the Company, a form of proxy is enclosed herewith.

The attached form of proxy is only to be completed by those shareholders who are:

c holding Italtile ordinary shares in certificated form; or

c recorded on the electronic subregister in ‘own name’ dematerialised form.

Shareholders who have dematerialised their shares through a CSDP or broker and wish to attend the AGM, must instruct their CSDP or broker to provide them with a letter of representation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement/mandate entered into between them and their CSDP or broker.

Forms of proxy must be lodged with the transfer secretaries of the Company at the address given below, by no later than 15:00 on Wednesday, 23 November 2011. Any shareholder who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the AGM.

Holders of dematerialised Italtile shares wishing to attend the AGM must inform their CSDP or broker of such intention and request their CSDP or broker to issue them with the relevant authorisation to attend.

By order of the Board

e J Willis

Company Secretary

Johannesburg

20 September 2012

special resolution no 3 – new Memorandum of incorporation (“Moi”)

THAT the existing MOI of the Company be and is hereby substituted in its entirety by the new MOI, which has been signed by the chairman of the meeting on the cover page for identification purposes, which MOI will take effect from the date of filing with the Companies and Intellectual Properties Commission.

The reason for the passing of this special resolution is for the Company to have a new MOI in substitution of the Company’s existing MOI, which new MOI is in compliance with the Act and the Listings Requirements.

A summary of the key changes that have been made in the new MOI proposed for adoption by shareholders is attached as an annexure to this notice of meeting.

The new MOI will lie open for inspection at the Company’s registered office from Monday, 22 October 2012 to 10:00 on Thursday, 22 November 2012.

ordinary resolution no 7 – authority to sign documentation

THAT any director of the Company or the Company secretary be and is hereby authorised to take all actions necessary and sign all documents required to give effect to the abovementioned special resolutions numbers 1, 2 and 3 and ordinary resolutions numbers 1 to 6.

litiGation stateMent

The directors of the Company, whose names are given on page 55 of this integrated annual report, are not aware of any legal or arbitration proceedings, pending or threatened against the Company, which may have or have had, in the 12 (twelve) months preceding the date of this notice, a material effect on the Company’s financial position.

directors’ responsiBilitY stateMent

The directors, whose names are given on page 55 of this integrated annual report, collectively and individually, accept full responsibility for the accuracy of the information given and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the integrated annual report contains all the information required by law and the Listings Requirements.


Annexure to notice of annual general meeting

2. proceedinGs at General MeetinGs

The proposed MOI provides that a general meeting may not

begin until there are present (or represented) at least three

shareholders entitled to vote, and sufficient members entitled

to exercise, in aggregate, at least 25% of all voting rights that

are entitled to be exercised on a single matter before the

general meeting.

3. proxies

The validity of proxy appointments has been altered from two

months to a period of one year, unless the notice states a

shorter period, or is revoked, as required in terms of the

provisions of the Act dealing with proxy appointments.

4. interest of directors

The new MOI has been amended to reflect the provisions of

the Companies Act dealing with personal financial interests of

directors, and the duty to disclose same.

5. distriBution

The provisions of the Act dealing with the wider concept of

“distributions” introduced by the Companies Act are reflected

in the proposed MOI.

6. indeMnitY

The provisions of the Act dealing with the indemnity of

directors are included.

Special resolution No 3 proposes the substitution of Italtile’s

existing MOI with a new MOI.

The Company’s existing MOI remains in force and effect for a

period of two years from 1 May 2011, being the date on which

the Companies Act No 71 of 2008, as amended (“the Act”) came

into effect, whereafter, if the Company has not adopted a new

MOI, any provision of the existing MOI which contravenes or is

inconsistent with such Act shall be void.

Accordingly, before 30 April 2013, the Company is required to

adopt a new MOI that will comply with the Act and the Listings

Requirements of JSE Limited (“JSE”) (“the Listings Requirements”).

As far as possible, the provisions of the existing MOI which are

not in conflict with the provisions of the Act have been retained.

However, the new MOI also reflects the amendments that are

required in terms of the Act and the Listings Requirements.

Below is a summary of the key changes that have been made in

the new MOI proposed for adoption by the shareholders:

1. definitions

The definitions have been amended to reflect the fundamental

changes in terminology used in the Act, such as:

c ‘beneficial owner’ has been amended to include all persons

who have a beneficial interest in the Company who are

registered in the Company’s securities register;

c ‘member’ is no longer applicable and has been replaced

with the term ‘shareholder’;

c a new definition ‘holder’ has been added to denote all

securities holders in the Company;


onlY to Be coMpleted BY certificated shareholders and deMaterialised shareholders With ‘oWn naMe’ reGistration

For use at the 23rd annual general meeting of the holders of ordinary shares in the Company (“Italtile shareholders”) to be held at Zenzele Park, cnr Likkewaan and Dr Vosloo Streets, Bartlett Ext 40, Boksburg, on Friday, 23 November 2012 at 11:00.

Italtile shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker must not complete this form of proxy but must provide their CSDP or broker with their voting instructions, except for Italtile shareholders who have elected ‘own name’ registration in the subregister through a CSDP or broker. It is these shareholders who must complete this form of proxy and lodge it with the transfer secretaries.

Holders of dematerialised Italtile shares wishing to attend the annual general meeting must inform their CSDP or broker of such intention and request their CSDP or broker to issue them with the relevant authorisation to attend.

A member entitled to attend and vote at the annual general meeting may appoint one or more proxies to attend, vote and speak in his/her/ its stead at the annual general meeting. A proxy need not be a member of the Company.

I/We (Name in block letters)

of (address)

being a member(s) of the Company, and entitled to votes do hereby appoint

of or, failing him/her

of or, failing him/her

the chairman of the annual general meeting, as my/our proxy to represent me/us at the annual general meeting, which will be held at Zenzele Park, cnr Likkewaan and Dr Vosloo Streets, Bartlett Ext 40, Boksburg, for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for and/or against the resolutions and/or abstain from voting in respect of the shares in the issued share capital of the Company registered in my/our name (see note 2 overleaf) as follows:

Resolutions For Against Abstain

1.1 To re-elect S I Gama as a director

1.2 To re-elect A Zannoni as a director

2. To reappoint Ernst & Young Inc. and Sarel Strydom as auditors

3. To elect S M du Toit, S I Gama and S G Pretorius as members of the Audit and Risk Committee

4. To approve the Company’s remuneration policy

5. To place the unissued shares of the Company under the control of the directors

6. To issue shares or sell treasury shares for cash

7. Special resolution No 1 – Acquisition of own securities

8. Special resolution No 2 – Financial assistance

9. Special resolution No 3 – New MOI

10. To authorise the signature of documentation to implement above resolutions

and generally to act as my/our proxy at the said annual general meeting. (Indicate with an “X” or the relevant number of votes, in the applicable space, how you wish your votes to be cast. If no directions are given, the proxy holder will be entitled to vote or to abstain from voting as that proxy holder deems fit.)

Signed at on 2012.

Signature of member(s) Assisted by (where applicable)

Please read the notes on the reverse side hereof.

Form of proxy

italtile limited

(Incorporated in the Republic of South Africa)

(Registration No 1955/000558/06)

(“the Company” or “Italtile”)

JSE code: ITE

ISIN code: ZAE000099123


1. A shareholder may insert the name of a proxy or the names of

two alternative proxies of his/her choice in the space(s)

provided, with or without deleting “chairman of the annual

general meeting”, but any such deletion or insertion must be

initialled by the shareholder. Any insertion or deletion not

complying with the aforegoing will be declared not to have

been validly effected. The person whose name stands first on

the proxy form and who is present at the annual general

meeting will be entitled to act as proxy to the exclusion of

those whose names that follow. In the event that no names are

indicated, the proxy shall be exercised by the chairman of the

annual general meeting.

2. A shareholder’s instructions to the proxy must be indicated by

the insertion of an “X” or the relevant number of votes

exercisable by that shareholder in the appropriate box

provided. An “X” in the appropriate box indicates the maximum

number of votes exercisable by that shareholder. Failure to

comply with the above will be deemed to authorise the proxy

to vote or to abstain from voting at the annual general meeting

as he/she deems fit in respect of all the shareholder’s votes

exercisable thereat. A shareholder or his/her proxy is not

obliged to use all the votes exercisable by the shareholder or

by his/her proxy, but the total of the votes cast and in respect

of which abstention is recorded, may not exceed the maximum

number of votes exercisable by the shareholder or by his/her

proxy.

3. To be effective, completed proxy forms must be lodged with

the transfer secretaries or at the registered office of the

Company not less than 48 hours (excluding Saturdays,

Sundays and public holidays) before the time appointed for

the holding of the annual general meeting. As the annual

general meeting is to be held at 11:00 on 23 November 2012,

proxy forms must be lodged on or before 15:00 on

21 November 2012.

4. The completion and lodging of this proxy form will not

preclude the relevant shareholder attending the annual general

meeting and speaking and voting in person thereat instead of

any proxy appointed in terms hereof.

5. The chairman of the annual general meeting may reject or

accept any proxy form which is completed and/or received

other than in compliance with these notes.

6. Any alteration to this proxy form, other than a deletion of

alternatives, must be initialled by the signatories.

7. Documentary evidence establishing the authority of a person

signing this proxy form in a representative or other legal

capacity must be attached to this proxy form unless previously

recorded by the Company or its registrars or waived by the

chairman of the annual general meeting.

8. Where there are joint holders of shares:

8.1 any one holder may sign the proxy form; and

8.2 the vote of the senior shareholder (for that purpose

seniority will be determined by the order in which the

names of the shareholders appear in the Company’s

register) who tenders a vote (whether in person or by

proxy) will be accepted to the exclusion of the vote(s) of

the other joint shareholders.

Notes to the form of proxy

Italtile Limited integrated annual report 2012BASTION GRAPHICS

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