| Wed 9 May 2007, 8:00 | | NCL - New Clicks - Unaudited Interim Group Results |
|
NCL
NCL
NCL - New Clicks - Unaudited Interim Group Results for the six months ended 28
February 2007
New Clicks Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/000645/06)
JSE share code: NCL
ISIN: ZAE000014585
("New Clicks" or "the group")
UNAUDITED INTERIM GROUP RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2007
Turnover up 12.1%
Operating profit up 23.7%
Diluted headline EPS up 34.1%
Return on equity 22.4%
Commentary
Introduction
New Clicks has made marked progress over the past six months in its turnaround
strategy to achieve sustainable performance, while at the same time investing
in the growth of the business to ensure long-term competitiveness and
shareholder value creation.
The group has produced a much improved operational and financial performance,
with progress in certain areas being ahead of the objectives set by the board
at the outset of the turnaround programme in early 2006.
Financial performance
Group turnover increased by 12.1% to R5.6 billion, with weighted inflation
measured at 1.0% for the period. Turnover for the retail businesses grew 14.2%
and by 14.1% on a comparable store basis, against price inflation of 1.2%. UPD
increased turnover by 11.3% with inflation at 0.5%.
Retail gross margin was impacted by one-off charges and declined by 130 basis
points to 26.8%. The underlying trading gross margins, including shrinkage, are
stable and management expects the retail margin for the full year to be in line
with last year`s 27.1%. UPD`s total income, which comprises gross profit and
other income (largely comprising logistics fees), was maintained at 8.6% of
turnover for the period.
Operating expenses were well managed and growth was contained at 5.2%, well
below the level of turnover growth.
As a consequence of both the increased turnover and tight expense control,
operating profit increased by 23.7%. Group operating margin increased from 4.5%
to 5.0%.
Headline earnings increased by 34.4% to R187.5 million. Diluted headline
earnings per share increased by 34.1% to 53.9 cents per share, in line with the
forecast range provided in the group`s trading statement on 12 April 2007.
The intense focus on working capital management has paid dividends. Inventory
levels declined 0.8% over the corresponding period in 2006 and the days cost of
sales in inventory improved from 65 to 57 days.
The group generated cash from operating activities of R532 million for the
period and utilised R256 million to repurchase shares, R88 million for capital
expenditure and R78 million for the payment of the 2006 final distribution to
shareholders. A total of 22.2 million shares, representing 6.2% of the issued
share capital, were repurchased in the market at an average price of R11.52 per
share. At 28 February 2007 the group`s cash and cash equivalents were R175
million, compared to a deficit of R431 million at the end of the first half of
2006.
The group has adopted return on assets managed (ROAM) as one of the key
performance measurements for its component businesses. ROAM improved from 15.7%
in February 2006 to 18.5% in February 2007. The group`s return on equity (ROE)
increased from 17.7% to 22.4%.
Trading performance
Retail
Clicks lifted turnover by 14.1% as the transition of the business to a health
and beauty specialist continued, with the core categories of health growing
19.8% and beauty 17.0%. Comparable store growth was 14.7% and inflation for the
period was 1.9%. Improved operating efficiencies contributed to a 31.0% growth
in operating profit to R152 million. Clicks opened a further 14 pharmacies in
the past six months and now has 124 dispensaries nationwide.
Discom has continued to refine its focus on the lower income market and
increased turnover by 13.2% and by 12.3% on a like-for-like basis. Inflation
for the period was 1.0%. The operating margin was impacted by a change in the
product mix and certain one-off charges, which resulted in a 2.5% decline in
operating profit to R20 million.
Strong DVD, gaming and local music sales lifted Musica`s turnover by 14.8%,
with same-store growth at 11.7%. The business experienced price deflation of
2.6% for the period. Non-music merchandise contributed 40% of turnover.
Operating profit rose 18.4% to R37 million.
The Body Shop increased turnover by 27.0%, driven by the success of the new
in-store loyalty programme and the relaunched make-up range. Comparable store
sales grew 17.9%. Operating profit for the period increased 23.5% to R7
million.
The group continues to capitalise on opportunities to expand its store
footprint and opened 15 stores in the first half of the year, with a further 19
planned for the balance of the financial year.
Wholesale distribution
UPD increased turnover by 11.3%, in line with management`s expectations.
Expenses were well managed to 5.4% of turnover, which contributed to a 23.6%
growth in operating profit to R65 million. In order to further improve
operating efficiencies, UPD has invested R45 million in the automation of the
ethical warehouse at its head office in Gauteng which will be completed at the
end of May.
Prospects
As the group continues to focus on delivering sustainable performance,
management`s priorities are to entrench Clicks as a health and beauty
specialist, establish leadership in healthcare supply and pharmacy management,
and transform Musica into an entertainment specialist.
Financial management is being enhanced through tight expense control, increased
cash flow generation and by optimising the balance sheet structure to achieve
an ROE of 30% in the medium term.
Trading since the end of February has been in line with forecasts. Modest
levels of price inflation are expected for the remainder of the financial year.
Earnings forecast
In the absence of any deterioration in trading conditions or any other
unforeseen factors, the directors expect the group`s diluted headline earnings
per share and diluted earnings per share for the year to 31 August 2007 to be
between 30% and 40% higher than the last financial year. Shareholders are
advised that these forecasts have not been reviewed or reported on by the
group`s auditors.
Distribution
The board of directors has approved an interim distribution of 15.0 cents per
share (2006: 11.2 cents), comprising a cash dividend of 3.4 cents per share and
a distribution out of share premium of 11.6 cents per share in lieu of a
dividend (collectively "the distribution").
Shareholders are advised of the following salient dates relating to the
distribution:
Last day to trade "cum" the distribution Friday, 15 June 2007
Shares trade "ex" the distribution Monday, 18 June 2007
Record date Friday, 22 June 2007
Payment to shareholders Monday, 25 June 2007
Share certificates may not be dematerialised or rematerialised between Monday,
18 June 2007 and Friday, 22 June 2007, both days inclusive.
By order of the Board
ALLAN SCOTT
Company Secretary
9 May 2007
Condensed Consolidated Balance Sheet
As at As at As at
28 February 28 February 31 August
2007 2006 2006
R`000 (unaudited) (unaudited) (audited)
Assets
Non-current assets 1 301 579 1 298 154 1 284 722
Property, plant and equipment 731 901 676 070 696 736
Investment property 6 900 6 900 6 900
Intangible assets 394 395 395 308 397 450
Goodwill 83 950 83 950 83 950
Deferred taxation assets 23 489 80 302 24 363
Loans receivable 60 944 55 624 75 323
Current assets 2 435 202 2 194 705 2 399 685
Inventories 1 460 912 1 472 402 1 443 161
Trade and other receivables 713 909 681 572 792 557
Income tax receivable 20 634 - 86 474
Loans receivable 3 184 - 1 481
Cash and cash equivalents 195 446 28 259 40 111
Derivative financial assets 41 117 12 472 35 901
Total assets 3 736 781 3 492 859 3 684 407
Equity and liabilities
Equity
Ordinary shareholders` interest 1 528 003 1 533 988 1 593 949
Non-current liabilities 353 138 293 448 325 785
Interest-bearing loans and
borrowings 113 256 138 864 150 855
Employee benefits 53 398 17 555 28 116
Deferred tax liabilities 86 281 46 631 45 669
Operating lease liability 100 203 90 398 101 145
Current liabilities 1 855 640 1 665 423 1 764 673
Bank overdraft 20 442 458 968 47 000
Trade and other payables 1 612 301 1 015 359 1 490 386
Employee benefits 71 481 62 224 105 475
Provisions 42 550 44 520 41 416
Interest-bearing loans and
borrowings 75 480 76 119 62 851
Income tax payable 33 386 8 233 17 545
Total equity and liabilities 3 736 781 3 492 859 3 684 407
Segmental Analysis
The split per business unit of turnover and profit is as follows:
6 months to 6 months to
28 February 28 February
2007 2006 %
R`000 (unaudited) (unaudited) change
Turnover
Clicks 2 810 631 2 463 073 14.1
Discom 612 243 541 078 13.2
Musica 480 175 418 257 14.8
The Body Shop 44 057 34 691 27.0
United Pharmaceutical Distributors 2 045 730 1 837 521 11.3
Other 4 299 3 702 16.1
Intragroup elimination (395 772) (300 691) (31.6)
Total 5 601 363 4 997 631 12.1
Profit before financing costs and
taxation
Clicks 152 174 116 126 31.0
Discom 19 961 20 481 (2.5)
Musica 36 661 30 973 18.4
The Body Shop 7 425 6 013 23.5
United Pharmaceutical Distributors 64 902 52 516 23.6
Other 498 629
Intragroup elimination (1 244) -
Capital items (1 383) (1 157)
Total 278 994 225 581 23.7
Condensed Consolidated Income Statement
6 months to 6 months to Year to
28 February 28 February 31 August
2007 2006 % 2006
R`000 (unaudited) (unaudited) change (audited)
Revenue 5 844 773 5 213 964 12.1 10 461 712
Turnover 5 601 363 4 997 631 12.1 10 000 621
Cost of merchandise
sold 4 487 565 3 964 348 13.2 8 047 045
Gross profit 1 113 798 1 033 283 7.8 1 953 576
Other income 238 324 212 565 12.1 449 721
Expenses 1 073 128 1 020 267 5.2 2 015 950
Depreciation and
amortisation 47 138 51 074 (7.7) 103 382
Occupancy costs 165 972 154 827 7.2 316 924
Employment costs 475 256 464 653 2.3 942 364
Other operating costs 383 379 348 556 10.0 647 658
Impairment of property,
plant and equipment - 182 3 159
Loss on disposal of
property, plant and
equipment 1 383 975 1 209
Goodwill impairment - - 1 254
Operating profit before
financing costs and
taxation 278 994 225 581 23.7 387 347
Net financing costs (22 216) (29 956) (25.8) (57 219)
Financial income 5 086 3 768 11 370
Financial expense (27 302) (33 724) (68 589)
Profit before taxation 256 778 195 625 31.3 330 128
Income tax expense 70 614 56 916 24.1 84 138
Profit for the period 186 164 138 709 34.2 245 990
Undiluted headline
earnings per share (cents) 54.7 40.8 34.1 73.1
Diluted headline
earnings per share (cents) 53.9 40.2 34.1 71.0
Undiluted earnings
per share (cents) 54.3 40.6 33.7 71.4
Diluted earnings per
share (cents) 53.5 40.0 33.8 69.4
Distributions per share (cents)
Proposed/paid - June/July 15.0 11.2 33.9 11.2
Paid - December 22.0
Headline Earnings Reconciliation
6 months to 6 months to Year to
28 February 28 February 31 August
2007 2006 % 2006
R`000 (unaudited) (unaudited) change (audited)
Profit for the period 186 164 138 709 34.2 245 990
Adjustments for
Impairment of
property, plant and
equipment - 129 3 159
Loss on disposal of
property, plant and
equipment 1 383 692 1 209
Goodwill impairment - - 1 254
Headline earnings 187 547 139 530 34.4 251 612
Accounting policies
These interim financial results have been prepared in accordance with IAS 34:
Interim Financial Reporting and the accounting policies used are consistent
with those applicable for the 2006 annual financial statements.
Change in comparatives
R78.5 million was reclassified from trade and other payables to inventory.
This represented goods in transit paid for in advance. In addition, an amount
of R93.5 million was eliminated from both trade and other receivables and trade
and other payables, representing intragroup balances not fully eliminated on
consolidation.
In the 2006 annual financial statements, certain amounts relating to the 2005
balance sheet were reclassified. This has had a consequent impact on the
presentation of the 2006 interim cash flow statement. An amount of R17.5
million was reclassified from trade and other payables to non-current employee
benefits and R15.7 million was reclassified from trade and other receivables to
non-current loans receivable (R15.4 million) and derivative financial assets
(R0.3 million).
Condensed Consolidated Statement of Changes in Equity
6 months to 6 months to Year to
28 February 28 February 31 August
2007 2006 2006
R`000 (unaudited) (unaudited) (audited)
Increase in share capital and
premium 3 119 38 997 74 394
Increase/(decrease) in
non-distributable reserve 20 (37) 110
Net cost of treasury shares
purchased (179 848) - (46 784)
Net profit for the period 186 164 138 709 245 990
Share option reserve 2 291 2 913 5 623
Distributions to shareholders (77 692) (63 533) (102 323)
Net increase/(decrease) in
shareholders` interest (65 946) 117 049 177 010
Opening shareholders` interest 1 593 949 1 416 939 1 416 939
Closing shareholders` interest 1 528 003 1 533 988 1 593 949
Percentage decrease in closing
shareholders` interest (0.4)
Condensed Consolidated Cash Flow Statement
6 months to 6 months to Year to
28 February 28 February 31 August
2007 2006 2006
R`000 (unaudited) (unaudited) (audited)
Cash generated by operations 326 140 287 991 505 930
Working capital changes 175 254 (594 839) (154 666)
Net interest paid (22 216) (29 956) (60 003)
Taxation received/(paid) 52 553 (21 894) (71 301)
Cash inflow/(outflow) from
operating activities before
distributions 531 731 (358 698) 219 960
Distributions paid to
ordinary shareholders (77 692) (63 533) (102 323)
Net cash effects of
operating activities 454 039 (422 231) 117 637
Net cash effects of
investing activities (70 447) (48 159) (101 543)
Net cash effects of
financing activities (201 699) (6 727) (69 391)
Net increase/(decrease)
in cash and cash equivalents 181 893 (477 117) (53 297)
Supplementary Information
28 February 28 February 31 August
2007 2006 2006
Number of ordinary shares in
issue (`000) 355 957 376 738 355 488
Weighted average number of shares
in issue (net of
treasury shares) (`000) 342 642 341 662 344 337
Weighted average diluted number
of shares in issue
(net of treasury shares) (`000) 347 803 346 723 354 365
Net asset value per share (cents) 453 442 459
Net tangible asset value per
share (cents) 311 304 320
Depreciation and amortisation (R`000) 49 630 53 671 108 602
Capital expenditure (R`000) 88 229 63 743 162 315
Capital commitments (R`000) 71 771 78 559 160 600
Registered address Cnr Searle and Pontac Streets, Cape Town 8001,
PO Box 5142, Cape Town 8000
Directors D.M. Nurek* (Chairman), P.F.K. Eagles*, M.J. Harvey,
D.A. Kneale# (Chief Executive Officer), R.L. Lumb*, M. Rosen*, R.V. Smither*,
L.A. Swartz*, K.D.M. Warburton (Chief Financial Officer) * non-executive
#British
Transfer Secretaries Computershare Investor Services 2004 (Proprietary)
Limited, 70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown
2107
Sponsor Investec Bank Limited
This information, together with additional detail is available on the
New Clicks Holdings website: http://www.newclicks.co.za
Date: 09/05/2007 08:00:01 Produced by the JSE SENS Department.
