| Thu 25 Oct 2007, 8:00 | | NCL - New Clicks Holdings Limited - Reviewed preli |
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NCL
NCL
NCL - New Clicks Holdings Limited - Reviewed preliminary group results for the
year ended 31 August 2007
NEW CLICKS HOLDINGS LIMITED
Registration Number: 1996/000645/06
Share code: NCL
ISIN: ZAE000014585
Reviewed preliminary group results for the year ended 31 August 2007
Turnover up 12.0%
Operating profit up 35.8%
Diluted headline EPS up 45.1%
Distribution per share up 45.2%
Return on equity increase to 24.7%
Commentary
Overview
New Clicks has delivered a strong trading, operational and financial
performance as the group continues to make encouraging progress towards
achieving its medium- term performance targets.
The focus on working capital management saw the group generate cash of R420
million after repurchasing shares of R558 million and continuing to invest for
long- term growth across its businesses.
Shareholder value has been enhanced with a 45.2% increase in total
distributions for the year to 48.2 cents per share. The group`s return on
equity (ROE) continued its strong growth trend, improving from 16.7% to 24.7%.
The senior management teams in Clicks, UPD and Musica have all been
strengthened to increase the depth of management talent in the group.
Following the sale of Discom, the ethnic beauty and hair care retailer, with
effect from the beginning of September 2007, the group`s retail brands are all
now focused on middle and upper income customers.
Financial performance
Group turnover increased by 12.0% to R11.2 billion (2006: R10.0 billion), with
selling price inflation ("inflation") for the period measured at 2.3%. Retail
turnover increased by 13.1% and by 13.2% on a comparable store basis, with
inflation of 2.5%. UPD increased turnover by 11.2% and experienced
inflation of 2.0% for the year.
Retail gross margin improved to 27.3% (2006: 27.1%), resulting in retail gross
profit increasing by 13.8% to R2.1 billion. UPD`s total income (gross profit
and other income) improved to 8.5% of turnover (2006: 8.3%).
The growth in operating expenditure of 9.0% was held below turnover growth.
Costs were impacted by higher employee incentive scheme expenses relating to
improved performance, the introduction of the blueprint store renewal
programme in Clicks and volume- related costs.
Operating profit increased 35.8%, reflecting the improved turnover, margin and
operating efficiencies.
Headline earnings increased by 41.9% to R356.9 million (2006: R251.6 million).
Diluted headline earnings per share grew 45.1% to 103.0 cents per share, in
line with the earnings forecast range communicated in the group`s trading
statement on 3 October 2007. During the year the group sold properties at a
capital profit of R28.4 million (after tax), which resulted in basic earnings
per share growing by 58.5% to 113.2 cents per share.
Working capital management continued to be a priority for the group. Inventory
levels were reduced by 2.8% over the previous year, despite the 12.0% growth in
turnover, while inventory measured by days in stock improved from 66 to 57
days.
The improved cash generation is also reflected in the 32.1% reduction in net
interest paid.
The group repurchased 14% of its issued share capital during the year,
including R558 million in the open market and R125 million by forward
agreement, at an average price of R13.68 per share. The group plans to continue
the share repurchase programme in the new financial year and will utilise the
net proceeds of the Disco m sale towards this purpose.
Trading performance
Retail
Clicks has continued to realise the benefits of its focused merchandise
strategy, increasing turnover by 14.3%. The performance was driven mainly by
growth of 19.0% in health and 15.6% in beauty, with these two categories now
accounting for 70.4% of total turnover. Comparable store sales grew by 14.3%
with inflation of 2.8% for the year. Further operating efficiencies led to a
43.2% increase in operating profit to R296 million. Clicks expanded its store
base to 320 and opened a further 21 dispensaries to bring the national pharmacy
network to 125.
Musica has further entrenched its position as an entertainment brand and strong
growth in DVD and gaming sales contributed to a 12.1% increase in turnover.
Same store sales growth was 10.0% while the business experienced deflation of
1.3%. Non- music merchandise accounted for 41% of turnover (2006:
35%). Musica`s operating profit increased 67.7% to R43 million.
The Body Shop increased turnover by 26.3%, boosted by the opening of four new
stores and customer response to its loyalty programme. Comparable store sales
grew 19.3% with inflation of 5.3%. Operating profit increased 24.7% to R14
million.
Discom lifted turnover by 7.0%, with operating profit up 17.9% to R40 million.
During the year 25 stores were closed, including six which were converted to
Clicks and one to Musica.
Wholesale distribution
UPD increased turnover by 11.2% and continued to diversify its client base. An
automated pharmaceutical distribution facility was taken into operation late in
the financial year at an investment of R43 million to further enhance
efficiencies. UPD`s expenses were well managed and the operating margin
increased from 3.0% to 3.2%, resulting in a 21.0% increase in operating profit
to R139 million.
Prospects
Management is confident that the group`s strategy will provide sustainable
competitive advantage. Plans have been developed to deliver the strategy,
including implementing the Clicks blueprint programme, diversifying UPD`s
revenue base and expanding the entertainment offering of Musica. Retail space
will be expanded by 5% with the planned opening of 38 to 40 new stores.
The trading environment is expected to become more challenging in 2008 and
uncertainty continues to prevail over healthcare regulations.
Nevertheless, the group remains confident of delivering improvements in
operating margin and continued cash generation, and anticipates achieving the
ROE target of 30% in 2008. Earnings are expected to grow at a more normalised
level off the higher base set in 2007.
Shareholder distribution
The board of directors has approved a final distribution of 33.2 cents per
share (2006: 22.0 cents per share) comprising a final cash dividend of 3.6
cents per share and a distribution out of share premium of 29.6 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, 7 December 2007
Shares trade "ex" the
distribution Monday, 10 December 2007
Record date Friday, 14 December 2007
Payment to shareholders Tuesday, 18 December 2007
Share certificates may not be dematerialised or rematerialised between Monday,
10 December 2007 and Friday, 14 December 2007, both days inclusive.
By order of the Board
ALLAN SCOTT
Company Secretary
25 October 2007
Condensed Consolidated Balance Sheet
As at As at
31 August 2007 31 August 2006
R`000 Note (reviewed) (audited)
Assets
Non -current assets 1 188 408 1 284 722
Property, plant and equipment 698 964 696 736
Investment property - 6 900
Intangible assets 291 339 397 450
Goodwill 83 950 83 950
Deferred tax assets 45 404 24 363
Loans receivable 68 751 75 323
Current assets 2 821 971 2 399 685
Inventories 1 191 847 1 443 161
Trade and other receivables 792 126 792 557
Income tax receivable 2 446 86 474
Loans receivable 4 616 1 481
Cash and cash equivalents 413 275 40 111
Derivative financial assets 59 391 35 901
Non -current assets held for sale 3 358 270 -
Total assets 4 010 379 3 684 407
Equity and liabilities
Equity
Ordinary shareholders` interest 1 296 188 1 593 949
Non -current liabilities 331 676 325 785
Interest- bearing loans and
borrowings 77 681 150 855
Employee benefits 64 943 28 116
Deferred tax liabilities 91 692 45 669
Operating lease liability 97 360 101 145
Current liabilities 2 382 515 1 764 673
Bank overdraft - 47 000
Trade and other payables 1 902 313 1 490 386
Employee benefits 127 383 105 475
Provisions 47 610 41 416
Interest- bearing loans and
borrowings 203 450 62 851
Income tax payable 86 755 17 545
Liabilities classified as held
for sale 3 15 004 -
Total equity and liabilities 4 010 379 3 684 407
Segmental Analysis
The split per business unit of turnover and profit
is as follows:
Year to Year to
31 August 2007 31 August 2006 %
R`000 (reviewed) (audited) change
Turnover
Clicks 5 562 340 4 864 521 14.3
Discom 1 153 507 1 077 682 7.0
Musica 873 411 778 798 12.1
The Body Shop 82 513 65 342 26.3
Style Studio 8 632 7 120 21.2
United Pharmaceutical
Distributors 4 295 013 3 863 143 11.2
Other - 286
Intragroup elimination (770 536) (656 271)
Total 11 204 880 10 000 621 12.0
Operating profit before
financing costs
Clicks 296 204 206 906 43.2
Discom 39 961 33 905 17.9
Musica 43 001 25 635 67.7
The Body Shop 13 803 11 067 24.7
Style Studio 358 1 075
United Pharmaceutical
Distributors 138 968 114 838 21.0
Intragroup elimination 1 494 (457)
533 789 392 969 35.8
Capital items 26 262 (5 622)
Total 560 051 387 347 44.6
Condensed Consolidated Income Statement
Year to Year to
31 August 2007 31 August 2006 %
R`000 Note (reviewed) (audited) change
Continuing operations
Revenue 10 529 632 9 338 713 12.8
Turnover 10 051 373 8 922 939 12.6
Cost of merchandise
sold 8 153 049 7 267 010 12.2
Gross profit 1 898 324 1 655 929 14.6
Other income 462 393 404 404 14.3
Expenses 1 866 889 1 701 269 9.7
Depreciation and
amortisation 81 587 83 612 (2.4)
Occupancy costs 284 605 261 924 8.7
Employment costs 891 262 805 603 10.6
Other operating costs 609 435 550 130 10.8
Impairment of
property, plant
and equipment - (3 159)
Goodwill impairment (250) (1 254)
Profit on disposal of
property,
plant and equipment 29 402 483
Operating profit
before financing costs 522 980 355 134 47.3
Net financing costs (38 827) (57 219) (32.1)
Financial income 15 866 11 370
Financial expense (54 693) (68 589)
Profit before tax 484 153 297 915 62.5
Income tax expense 129 965 74 796 73.8
Profit for the year
from continuing operations 354 188 223 119 58.7
Discontinued operations
Profit for the year
from discontinued
operations 2 26 320 22 871 15.1
Total profit for the year 380 508 245 990 54.7
Undiluted earnings
per share (cents) 113.2 71.4 58.5
Diluted earnings per
share (cents) 109.9 69.4 58.4
Distributions per
share (cents)
- interim paid 15.0 11.2 33.9
- final declared/paid 33.2 22.0 50.9
48.2 33.2 45.2
Headline Earnings Reconciliation
Year to Year to
31 August 2007 31 August 2006 %
R`000 (reviewed) (audited) change
Profit for the year 380 508 245 990
Adjustments for
Impairment of property,
plant and equipment - 3 159
Goodwill impairment 250 1 254
Profit/(loss) on disposal
of property, plant and
equipment (23 836) 1 209
Headline earnings 356 922 251 612 41.9
Undiluted headline earnings
per share (cents) 106.1 73.1 45.1
Diluted headline earnings
per share (cents) 103.0 71.0 45.1
Condensed Consolidated Changes in Equity
Year to Year to
31 August 2007 31 August 2006
R`000 (reviewed) (audited)
Opening shareholders` interest 1 593 949 1 416 939
Increase in share capital and premium 2 402 74 394
Net cost of own shares purchased (562 505) (46 784)
(Decrease)/Increase in non- distributable
reserve (629) 110
Profit for the year 380 508 245 990
Share option reserve 3 749 5 623
Distributions to shareholders (121 286) (102 323)
Closing shareholders` interest 1 296 188 1 593 949
Percentage decrease in closing
shareholders` interest (18.7)
Condensed Consolidated Cash Flow Statement
Year to Year to
31 August 2007 31 August 2006
R`000 (reviewed) (audited)
Cash generated by operations 622 366 505 930
Working capital changes 520 811 (154 666)
Net interest paid (36 383) (60 003)
Taxation received/(paid) 37 503 (71 301)
Cash effects of operating activities 1 144 297 219 960
Distributions to shareholders (121 286) (102 323)
Net cash effects of operating activities 1 023 011 117 637
Net cash effects of investing activities (103 982) (101 543)
Net cash effects of financing activities (498 865) (69 391)
Net increase/(decrease) in cash and cash
equivalents 420 164 (53 297)
Supplementary Information
31 August 2007 31 August 2006
Number of ordinary shares in issue (`000) 335 957 355 488
Number of ordinary shares in issue (net
of treasury shares) (`000) 316 115 347 613
Weighted average number of shares in
issue (`000) 336 266 344 337
Weighted average diluted number of
shares in issue (`000) 346 372 354 365
Net asset value per share (cents) 410 459
Net tangible asset value per share
(cents) 260 320
Depreciation and amortisation (R`000) 104 401 108 602
Capital expenditure (R`000) 154 622 162 315
Capital commitments (R`000) 176 000 160 600
Notes
1. KPMG Inc, the group`s independent auditors, has reviewed the preliminary
financial statements contained in this preliminary report, and has expressed an
unmodified conclusion on the preliminary financial statements. Their review
report is available for inspection at the company`s registered office.
These preliminary financial statements have been prepared in accordance with
the recognition and measurement requirements of IFRS an d the disclosure
requirements of IAS 34. Accounting policies are consistent with those of the
prior years.
2. Discontinued operations
Year to Year to
31 August 2007 31 August 2006 %
R`000 (reviewed) (audited) change
Revenue from discontinued
operations 1 192 255 1 122 999 6.2
Turnover 1 153 507 1 077 682 7.0
Cost of merchandise sold 828 873 780 035 6.3
Gross profit 324 634 297 647 9.1
Other income 38 748 45 317 (14.5)
Expenses 323 421 309 059 4.6
Depreciation and amortisation 16 758 19 770 (15.2)
Occupancy costs 51 322 55 000 (6.7)
Employment costs 148 939 136 761 8.9
Other operating costs 106 402 97 528 9.1
Loss on disposal of property,
plant and equipment (2 890) (1 692)
Profit from discontinued
operations 37 071 32 213 15.1
Income tax expense 10 751 9 342 15.1
Profit for the year from
discontinued operations 26 320 22 871 15.1
During the year agreement was reached to sell the Discom business to Edcon
Consolidated Stores Limited ("Edcon").
Set out above are the results of the Discom business unit which, as a result of
meeting the definition of a discontinued operation, are required to be
separately disclosed from the results of the continuing operations.
3. Analysis of non-current assets and related liabilities held for sale
Year to Year to
31 August 2007 31 August 2006
R`000 (reviewed) (audited)
Property, plant and equipment 46 250 -
Trademark 100 000 -
Inventory 211 267 -
Trade and other receivables 753 -
358 270 -
Liabilities classified as held for sale
Operating lease liabilities 6 307 -
Employee benefits 8 697 -
15 004 -
The non-current assets and liabilities held for sale pertain to the Discom
business, which has been transferred to Edcon subsequent to year end.
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
Registration Number: 1996/000645/06 Share code: NCL ISIN: ZAE000014585
Date: 25/10/2007 08:00:12 Produced by the JSE SENS Department.
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