| Thu 23 Oct 2008, 8:30 | | NCL - New Clicks Holdings - Reviewed preliminary group results for the year |
|
NCL
NCL
NCL - New Clicks Holdings - Reviewed preliminary group results for the year
ended 31 August 2008
NEW CLICKS HOLDINGS
Registration number: 1996/000645/06
Share code: NCL
ISIN: ZAE000014585
REVIEWED PRELIMINARY GROUP RESULTS
for the year ended 31 August 2008
* turnover - continuing operations up 12.2%
* diluted headline EPS up 28.1%
* distribution per share up 26.8%
* return on equity increases to 32.8%
Commentary
Overview
New Clicks posted strong real sales growth for the year, demonstrating the
resilient nature of its business and product offering in a slowing consumer
economy. The group`s businesses all strengthened their market position and
recorded market share gains in the period.
Return on shareholders` interest (ROE) increased from 24.7% to 32.8% as the
group achieved all its medium-term financial targets. The group`s ROE
has more than doubled since 2005 while diluted headline earnings per share
(HEPS) has shown a three-year compound growth rate of 32.0%.
Despite the challenging trading environment the group has continued to invest
for longer-term growth.
Financial performance
Continuing operations
Turnover increased by 12.2% to R11.3 billion (2007: R10.1 billion), with
selling price inflation of 3.9% for the year.
Turnover from the retail businesses of Clicks, Musica and The Body Shop rose by
11.6% and 9.2% on a comparable store basis, with price inflation of 3.8%. UPD,
the group`s pharmaceutical distributor and wholesaler, lifted turnover by 13.3%
and reported price inflation of 3.9%.
Total income (gross profit plus other income) increased 15.0% to R2.7 billion.
The 13.5% growth in operating expenditure was contained below the growth in
total income. Operating expenditure includes the costs relating to the hedge on
the employee incentive schemes, with the value of the hedge moving in line with
market movements. When the mark-to-market valuation of the hedge is excluded,
growth in operating expenditure was held at 10.8%.
The retail operating margin improved from 5.4% to 6.1% while UPD`s margin was
maintained at 3.2%, resulting in an overall increase in the margin to 5.2%
(2007: 4.9%). The improved margin and higher turnover growth translated into
a 19.9% increase in operating profit to R592 million.
Total group
Headline earnings increased 12.3% from R357 million to R401 million.
Diluted HEPS per share increased 28.1% to 131.9 cents per share, continuing to
benefit from the share buy-back programme. Diluted earnings per share were
boosted by the disposal of businesses and sale of land during the year and rose
32.5% to 145.6 cents per share. This performance is in line with the earnings
forecast ranges provided with the interim results and the tighter ranges
communicated in the trading statement published on 6 October 2008.
Cash generated from operations increased by 16.3% to R724 million. The free
cash flow (cash inflow from operating activities before distributions) of R264
million is impacted by two factors: firstly, changes to working capital funding
over the past two years and secondly, timing differences attributed to cash tax
payments after utilising tax losses. Management believes a normalised level
of free cash flow for the period would be R643 million.
Trading performance
Clicks continued its strong performance and increased turnover by 12.1%, with
real sales growth of 8.2%. Sales on a comparable store basis increased 10.2%.
The key drivers of growth were the health and beauty merchandise categories
which grew 19.5% and 13.0% respectively, confirming the defensive nature of the
Clicks offering in a tough economic environment. Clicks extended its pharmacy
network to 157 following the opening of 32 new pharmacies. Improved store
processes and better buying lifted the operating margin from 5.3% to 6.0%,
resulting in a 26.7% increase in operating profit.
UPD increased turnover by 13.3%, benefiting from the growth of the Link
pharmacy buying group, a new distribution contract and sales to hospital
groups. Overall market share increased from 25.6% to 26.4%. Despite pressure on
transport costs, improved operating efficiencies resulted in a steady increase
in operating profit in the second half, with growth of 11.0% for the financial
year.
Musica increased turnover by 7.7% as trading slowed in the second half. DVD
sales grew 19.7% and gaming 26.2%, although CD sales declined 3.0%. Musica has
made a successful transition from music to an entertainment business, with
sales of non-music products increasing from 41% to 46% of total turnover for
the year. Tight cost control and good merchandise buying contributed to a 16.7%
increase in operating profit.
The 17.5% growth in turnover in The Body Shop was driven by new store openings
and the Love Your Body loyalty programme. Operating profit increased by 13.0%.
Prospects
The group`s strategic objectives remain unchanged and the medium-term ROE
target has been revised upwards to 35 - 40% to reflect improved prospects.
The performance over the past year has shown that the group`s businesses are
robust and well positioned in the current trading environment. Capital
expenditure of R250 million has been committed for the year ahead.
In the absence of any marked deterioration in trading conditions, shareholders
can expect continued real earnings growth in the 2009 financial year.
Shareholder distribution
The board of directors has approved a distribution of 42.3 cents per share
(2007: 33.2 cents per share) comprising a final cash dividend of 3.7 cents per
share and a capital reduction distribution out of share premium of 38.6 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, 5 December 2008
Shares trade "ex" the distribution Monday, 8 December 2008
Record date Friday, 12 December 2008
Payment to shareholders Monday, 15 December 2008
Share certificates may not be dematerialised or rematerialised between Monday,
8 December 2008 and Friday, 12 December 2008, both days inclusive.
By order of the board
Allan Scott
Company Secretary
23 October 2008
Consolidated Income Statement
Year to Year to
31 August 31 August
2008 2007 %
R`000 Note (reviewed) (audited) change
Continuing operations
Revenue 11 799 096 10 529 632 12.1
Turnover 11 281 156 10 051 373 12.2
Cost of merchandise sold (9 070 132) (8 153 049) 11.2
Gross profit 2 211 024 1 898 324 16.5
Other income 499 209 462 393 8.0
Expenses (2 118 071) (1 866 889) 13.5
Depreciation and
amortisation (95 378) (81 587) 16.9
Occupancy costs (306 488) (284 605) 7.7
Employment costs (986 128) (891 262) 10.6
Other costs (730 077) (609 435) 19.8
Operating profit 592 162 493 828 19.9
Profit on disposal of
property, plant and
equipment 13 925 29 402
Profit on disposal of
business 1 244 -
Goodwill impairment - (250)
Profit before financing
costs 607 331 522 980 16.1
Net financing costs (51 184) (38 827) 31.8
Financial income 18 731 15 866
Financial expense (69 915) (54 693)
Profit before taxation 556 147 484 153 14.9
Income tax expense (147 377) (129 965) 13.4
Profit for the year from
continuing operations 408 770 354 188 15.4
Discontinued operations
Profit for the year from
discontinued operations 2 33 538 26 320
Total profit for the year 442 308 380 508 16.2
Attributable to:
Equity holders of the parent 442 435 380 508 16.3
Minority interest (127) -
442 308 380 508
Earnings per share (cents) 148.4 113.2 31.1
Diluted earnings per share
(cents) 145.6 109.9 32.5
Distributions per share
(cents)
Interim paid 18.8 15.0 25.3
Final declared/paid 42.3 33.2 27.4
61.1 48.2 26.8
Headline Earnings Reconciliation
Year to Year to
31 August 31 August
2008 2007 %
R`000 (reviewed) (audited) change
Total profit for the year attributable
to equity holders of the parent 442 435 380 508
Adjustments for
Profit on disposal of property, plant
and equipment (12 412) (23 836)
Profit on disposal of business (29 162) -
Goodwill impairment - 250
Headline earnings 400 861 356 922 12.3
Headline earnings per share (cents) 134.4 106.1 26.7
Diluted headline earnings per share
(cents) 131.9 103.0 28.1
Segmental Analysis
The split per business unit of
turnover and operating profit is as
follows: Year to Year to
31 August 31 August
2008 2007 %
R`000 (reviewed) (audited) change
Turnover
Clicks 6 235 213 5 562 340 12.1
Musica 940 650 873 411 7.7
The Body Shop 96 957 82 513 17.5
Style Studio - 8 632
United Pharmaceutical Distributors 4 864 586 4 295 013 13.3
Intragroup elimination (856 250) (770 536) 11.1
Continuing operations 11 281 156 10 051 373 12.2
Discontinued operations 50 140 1 153 507
Total 11 331 296 11 204 880 1.1
Operating profit
Clicks 375 300 296 204 26.7
Musica 50 178 43 001 16.7
The Body Shop 15 602 13 803 13.0
Style Studio 532 358
United Pharmaceutical Distributors 154 295 138 968 11.0
Intragroup elimination (3 745) 1 494
Continuing operations 592 162 493 828 19.9
Discontinued operations 7 277 39 961
Total 599 439 533 789 12.3
Condensed Consolidated Balance Sheet
As at As at
31 August 31 August
2008 2007
R`000 Note (reviewed) (audited)
Non-current assets 1 252 989 1 188 408
Property, plant and equipment 734 485 698 964
Intangible assets 302 141 291 339
Goodwill 85 811 83 950
Deferred tax assets 72 482 45 404
Loans receivable 58 070 68 751
Current assets 2 332 333 2 821 971
Inventories 1 370 889 1 191 847
Trade and other receivables 805 935 792 126
Income tax receivable 1 962 2 446
Loans receivable 8 064 4 616
Cash and cash equivalents 101 139 413 275
Derivative financial assets 44 344 59 391
Assets held for sale 3 - 358 270
Total assets 3 585 322 4 010 379
Equity and liabilities
Total equity 1 144 479 1 296 188
Non-current liabilities 371 753 331 676
Interest-bearing loans and borrowings 61 460 77 681
Employee benefits 130 866 64 943
Deferred tax liabilities 81 334 91 692
Operating lease liability 98 093 97 360
Current liabilities 2 069 090 2 382 515
Trade and other payables 1 780 089 1 902 313
Employee benefits 104 262 127 383
Provisions 51 546 47 610
Interest-bearing loans and borrowings 54 180 203 450
Income tax payable 75 956 86 755
Derivative financial liabilities 3 057 -
Liabilities held for sale 3 - 15 004
Total equity and liabilities 3 585 322 4 010 379
Condensed Consolidated Cash Flow Statement
Year to Year to
31 August 31 August
2008 2007
R`000 (reviewed) (audited)
Operating profit before working capital changes 723 773 622 366
Working capital changes (224 230) 520 810
Net interest paid (42 612) (36 383)
Taxation (paid)/received (192 609) 37 504
Cash inflow from operating activities before
distributions 264 322 1 144 297
Distributions paid to ordinary shareholders (156 793) (121 286)
Net cash effects of operating activities 107 529 1 023 011
Net cash effects of investing activities 183 139 (103 982)
Proceeds on disposal of business 316 356 -
Other investing activities (133 217) (103 982)
Net cash effects of financing activities (602 804) (498 865)
Purchase of treasury shares (607 041) (557 576)
Other financing activities 4 237 58 711
Net (decrease)/increase in cash and cash
equivalents (312 136) 420 164
Condensed Consolidated Changes in Equity
Year to Year to
31 August 31 August
2008 2007
R`000 (reviewed) (audited)
Opening balance 1 296 188 1 593 949
Acquisition of subsidiary - minority interest 273 -
Increase in share capital and premium - 2 402
Share cancellation expenses written off (383) -
Net cost of own shares purchased (437 210) (562 505)
Increase/(decrease) in non-distributable reserve 50 (629)
Profit for the year 442 308 380 508
Share option reserve 46 3 749
Distributions to shareholders (156 793) (121 286)
Total 1 144 479 1 296 188
Supplementary Information
31 August 31 August
2008 2007
Number of ordinary shares in issue (`000) 324 139 335 957
Number of ordinary shares in issue (net of treasury
shares) (`000) 290 325 316 115
Weighted average number of shares in issue (net of
treasury shares) (`000) 298 166 336 266
Weighted average diluted number of shares in issue
(net of treasury shares) (`000) 303 847 346 372
Net asset value per share (cents) 394 410
Net tangible asset value per share (cents) 261 260
Depreciation and amortisation (R`000) 102 648 104 401
Capital expenditure (R`000) 174 300 154 622
Capital commitments (R`000) 246 600 176 000
Notes
1. Auditor`s preliminary report
KPMG Inc, the group`s independent auditor, 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 and the disclosure
requirements of IAS 34. The accounting policies have been applied consistently
with those used in the annual financial statements for the financial period
ended August 2007 with the following exception: With the introduction of new
accounting statement IFRS 7: "Financial Instruments: Disclosures" and the
amendment to IAS 1: "Presentation of Financial Statements". The application of
these statements have had no significant effect on the group`s results.
2. Discontinued operations
Year to Year to
31 August 31 August
2008 2007
R`000 (reviewed) (audited)
Revenue from discontinued operations 52 142 1 192 255
Turnover 50 140 1 153 507
Cost of merchandise sold (36 383) (828 873)
Gross profit 13 757 324 634
Other income 1 905 38 748
Expenses (8 385) (323 421)
Depreciation and amortisation (44) (16 758)
Occupancy costs 3 909 (51 322)
Employment costs (7 351) (148 939)
Other operating costs (4 899) (106 402)
Operating profit 7 277 39 961
Loss on disposal of property, plant and equipment (4) (2 890)
Profit on disposal of business 23 649 -
Profit before financing costs 30 922 37 071
Finance income 97 -
Profit before tax 31 019 37 071
Income tax 2 519 (10 751)
Profit for the year from discontinued operations 33 538 26 320
In the prior year agreement was reached to sell the Discom business to Edgars
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 assets and related liabilities held for sale
Year to Year to
31 August 31 August
2008 2007
R`000 (reviewed) (audited)
Property, plant and equipment - 46 250
Trademark - 100 000
Inventory - 211 267
Trade and other receivables - 753
- 358 270
Liabilities related to assets held for sale
Operating lease liabilities - 6 307
Employee benefits - 8 697
- 15 004
The assets and liabilities held for sale pertain to the Discom business which
was transferred to Edcon during September 2007.
Registered address: Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Directors: DM Nurek* (Chairman), F Abrahams*, JA Bester*, PFK Eagles*,
BD Engelbrecht, MJ Harvey, F Jakoet*, DA Kneale# (Chief Executive Officer),
RL Lumb*, M Rosen*, KDM Warburton (Chief Financial Officer)
* non-executive # British
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Sponsor: Investec Bank Limited
Registration number: 1996/000645/06
Share code: NCL
ISIN: ZAE000014585
This information, together with additional detail is available on the New
Clicks Holdings website http://www.newclicks.co.za
Date: 23/10/2008 08:30:10 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
