| Thu 22 Oct 2009, 8:00 | | CLS - Clicks Group Limited - Reviewed preliminary group results for the year |
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CLS
CLS
CLS - Clicks Group Limited - Reviewed preliminary group results for the year
ended 31 August 2009
CLICKS GROUP LIMITED
(formerly New Clicks Holdings Limited)
(Registered in the Republic of South Africa)
Share code: CLS
ISIN: ZAE000134854
REVIEWED PRELIMINARY GROUP RESULTS For the year ended 31 August 2009
retail turnover up 15.4%
operating profit up 20.1%
diluted headline EPS up 26.2%
total distribution per share up 37.5%
return on equity increases to 42.3%
Commentary
Overview
The trading and financial performance over the past year reflects the benefits
of a clear strategic focus which has entrenched the group`s market leadership
in healthcare retail and supply through Clicks and UPD.
The high levels of real growth in retail turnover and earnings also highlight
the defensive nature of the business in the current tough economic climate.
The key indicator of diluted headline earnings per share (HEPS) increased by
26.2% through improved trading and efficient cash and capital management.
Diluted HEPS has grown at a four-year compound rate of 30.4%.
Return on shareholders` interest (ROE) rose strongly from 32.8% to 42.3% and
has increased threefold since 2005. The group has set a revised medium-term
target range for ROE of 40% - 50%.
Financial performance
Group turnover from continuing operations increased by 8.8% to R12.2 billion
(2008: R11.2 billion). Retail turnover rose by 15.4% as the Clicks chain
produced another year of excellent growth and lifted turnover by 17.7%. Selling
price inflation for the retail businesses was 8.6%.
Turnover in UPD increased by 4.4% as the business was repositioned during the
year to focus on customer profitability and better operating efficiencies.
Price inflation was 9.2%.
Total income, consisting of gross profit and other income, increased 13.8% to
R3.1 billion.
Operating expenses increased 12.0%, with continued investment in stores,
pharmacies and the acquisition of Direct Medicines.
Operating margin increased from 5.3% to 5.8%, with the margins of Clicks and
UPD both benchmarking favourably against comparable international businesses.
The enhanced margin translated into growth of 20.1% in operating profit from
continuing operations to R709 million.
Headline earnings increased 19.7% to R478 million. Diluted HEPS increased 26.2%
to 165.9 cents per share, in line with the earnings guidance provided in the
group`s trading statement on 30 September 2009.
A final distribution of 59.5 cents per share has been declared, bringing the
total distribution for the year to 84.0 cents, an increase of 37.5% on the
previous financial year. As previously advised to shareholders, distribution
cover has been reduced to two times undiluted headline earnings from the 2009
financial year.
Inventory continued to be well managed, with the group`s inventory days
improving from 55 to 54 days while the increase in inventory levels was
contained to 3.7%, well below the rate of turnover growth.
The group generated net cash of R309 million after capital expenditure (R225
million), distributions (R191 million) and share buy-backs (R338 million).
Trading performance
Clicks produced another strong all-round trading performance as turnover
increased by 17.7%, with second half sales growing by 20.1%. Comparable store
sales rose 15.3%. Clicks increased its national pharmacy base to 207 following
the opening of 50 in-store dispensaries during the year. Improved inventory
management and enhanced efficiencies lifted the operating margin to 6.5% (2008:
6.1%), resulting in operating profit growth of 25.9%.
UPD`s strategy to focus on loyal, profitable customers has seen sales to the
core customer groups of Clicks, Clicks Direct Medicines, hospitals and Link
pharmacies increasing to 76% (2008: 65%) of UPD`s wholesale sales. The
repositioning has realised further operating efficiencies and helped lead to a
12.4% improvement in operating profit. During the year UPD invested R30 million
to further develop the capability to grow its third party distribution agency
business.
The slow-down in discretionary spending continues to impact Musica as turnover
grew by 0.8%. Musica remains the leading entertainment retailer and continues
to gain market share. Operating profit for the period increased 0.5%, a
creditable performance in the prevailing market conditions.
The Body Shop benefited from new store openings and increased turnover by
8.7%, with operating profit up 4.7%.
Strategy and outlook
The integrated healthcare retail and supply model provides a unique positioning
for the Clicks Group in South Africa. Growth and performance will be driven
through the core strategic objectives of creating pre-eminence in health and
beauty retailing and pre-eminence in healthcare supply and pharmacy management.
Good organic growth prospects should lead to market share increases through the
expansion of the Clicks store base and roll-out of in-store pharmacies, and
continued growth in the health and beauty markets, while UPD is expected to
benefit from sales growth in Clicks and Link, as well as new revenue
opportunities in export sales and third party distribution agencies.
Management does not expect an increase in consumer spending in the short term.
Trading for the first seven weeks of the new financial year has continued in
line with the performance for the 2009 financial year.
Shareholder distribution
The board of directors has approved a final distribution of 59.5 cents per share
(2008: 42.3 cents per share). The source of such distribution will be a capital
reduction out of share premium.
Shareholders are advised of the following salient dates relating to the
distribution:
Last day to trade "cum" the distribution Friday, 15 January 2010
Shares trade "ex" the distribution Monday, 18 January 2010
Record date Friday, 22 January 2010
Payment to shareholders Monday, 25 January 2010
Share certificates may not be dematerialised or rematerialised between Monday,
18 January 2010 and Friday, 22 January 2010, both days inclusive.
By order of the board
David Janks
Company Secretary
Cape Town
22 October 2009
Consolidated Income Statement
Year to
Year to 31 August
31 August 2008
2009 (audited) %
R`000 (reviewed) (restated) change
Continuing operations
Revenue 12 754 202 11 711 517 8.9
Turnover 12 175 312 11 193 577 8.8
Cost of merchandise sold (9 657 930) (8 984 267) 7.5
Gross profit 2 517 382 2 209 310 13.9
Other income 564 482 499 209 13.1
Expenses (2 372 694) (2 118 071) 12.0
Depreciation and amortisation (113 665) (95 378) 19.2
Occupancy costs (352 055) (306 488) 14.9
Employment costs (1 156 928) (986 128) 17.3
Other costs (750 046) (730 077) 2.7
Operating profit 709 170 590 448 20.1
(Loss)/profit on disposal of
property, plant and equipment (7 177) 13 925
Profit on disposal of business - 1 244
Profit before financing costs 701 993 605 617 15.9
Net financing costs (54 773) (51 184) 7.0
Financial income 14 408 18 731
Financial expense (69 181) (69 915)
Profit before taxation 647 220 554 433 16.7
Income tax expense (174 619) (146 897) 18.9
Profit for the year from continuing
operations 472 601 407 536 16.0
Discontinued operations
Profit for the year from discontinued
operations - 33 538
Total profit for the year 472 601 441 074 7.1
Attributable to:
Equity holders of the parent 472 387 441 201 7.1
Minority interest 214 (127)
472 601 441 074
Earnings per share (cents) 165.6 148.0 11.9
Diluted earnings per share (cents) 163.8 145.2 12.8
Distributions per share (cents)
Interim paid 24.5 18.8 30.3
Final declared/paid 59.5 42.3 40.7
84.0 61.1 37.5
Headline Earnings Reconciliation
Year to
Year to 31 August
31 August 2008
2009 (audited) %
R`000 (reviewed) (restated) change
Total profit for the year attributable
to equity holders of the parent 472 387 441 201
Adjustments for
Loss/(profit) on disposal of property,
plant and equipment 6 100 (12 412)
Profit on disposal of business - (29 162)
Headline earnings 478 487 399 627 19.7
Headline earnings per share (cents) 167.7 134.0 25.1
Diluted headline earnings per share
(cents) 165.9 131.5 26.2
Condensed Consolidated Balance Sheet
As at
As at 31 August
31 August 2008
2009 (audited)
R`000 (reviewed) (restated)
Non-current assets 1 361 915 1 252 989
Property, plant and equipment 829 513 734 485
Intangible assets 302 313 302 141
Goodwill 96 124 85 811
Deferred tax assets 88 243 72 482
Loans receivable 45 722 58 070
Current assets 2 819 291 2 332 333
Inventories 1 421 496 1 370 889
Trade and other receivables 908 398 807 897
Loans receivable 11 342 8 064
Cash and cash equivalents 409 754 101 139
Derivative financial assets 68 301 44 344
Total assets 4 181 206 3 585 322
Equity and liabilities
Total equity 1 125 263 1 141 604
Non-current liabilities 317 753 370 635
Interest-bearing borrowings 37 428 61 460
Employee benefits 91 134 130 866
Deferred tax liabilities 83 351 80 216
Operating lease liabilities 105 840 98 093
Current liabilities 2 738 190 2 073 083
Trade and other payables 2 408 117 1 827 998
Employee benefits 240 596 104 262
Provisions 6 254 7 630
Interest-bearing borrowings 29 877 54 180
Income tax payable 33 316 75 956
Derivative financial liabilities 20 030 3 057
Total equity and liabilities 4 181 206 3 585 322
Condensed Consolidated Changes in Equity
Year to
Year to 31 August
31 August 2008
2009 (audited)
R`000 (reviewed) (restated)
Opening balance 1 141 604 1 296 188
As restated for the adoption of IFRIC 13
"Customer Loyalty Programmes" - (1 641)
Opening balance - restated 1 141 604 1 294 547
Acquisition of subsidiary - minority interest 1 925 273
Share cancellation expenses written off (99) (383)
Net cost of own shares purchased (295 114) (437 210)
Foreign currency translation reserve (285) 50
Acquisition of option in subsidiary (4 987) -
Profit for the year 472 601 441 074
Share option reserve 717 46
Distributions to shareholders (191 099) (156 793)
Total 1 125 263 1 141 604
Condensed Consolidated Cash Flow Statement
Year to
Year to 31 August
31 August 2008
2009 (audited)
R`000 (reviewed) (restated)
Profit before working capital changes 825 407 722 059
Working capital changes 489 583 (222 516)
Net interest paid (28 337) (42 612)
Taxation paid (229 158) (192 609)
Cash inflow from operating activities before
distributions 1 057 495 264 322
Distributions paid to shareholders (191 099) (156 793)
Net cash effects of operating activities 866 396 107 529
Net cash effects of investing activities (218 630) 183 139
(Acquisition of business)/proceeds on disposal
of business (9 924) 314 631
Capital expenditure (224 625) (174 300)
Other investing activities 15 919 42 808
Net cash effects of financing activities (339 151) (602 804)
Purchase of treasury shares (337 501) (607 041)
Other financing activities (1 650) 4 237
Net increase/(decrease) in cash and cash
equivalents 308 615 (312 136)
Segmental Analysis
The split per business unit of turnover and operating profit is as follows:
Year to
Year to 31 August
31 August 2008
2009 (audited) %
R`000 (reviewed) (restated) change
Turnover
Clicks 7 238 056 6 147 634 17.7
Musica 947 773 940 650 0.8
The Body Shop 105 432 96 957 8.7
UPD* 5 077 444 4 864 586 4.4
Intragroup elimination (1 193 393) (856 250) 39.4
Continuing operations 12 175 312 11 193 577 8.8
Discontinued operations - 50 140
Total 12 175 312 11 243 717 8.3
Operating profit
Clicks 470 238 373 586 25.9
Musica 50 422 50 178 0.5
The Body Shop 16 338 15 602 4.7
Style Studio - 532
UPD* 173 412 154 295 12.4
Intragroup elimination (1 240) (3 745)
Continuing operations 709 170 590 448 20.1
Discontinued operations - 7 277
Total 709 170 597 725 18.6
* Includes Direct Medicines
Supplementary Information
31 August
31 August 2008
2009 (audited)
(reviewed) (restated)
Number of ordinary shares in issue (`000) 302 841 324 139
Number of ordinary shares in issue (net of
treasury shares) (`000) 276 306 290 325
Weighted average number of shares in issue (net
of treasury shares) (`000) 285 249 298 166
Weighted average diluted number of shares in
issue (net of treasury shares) (`000) 288 349 303 847
Net asset value per share (cents) 407 393
Net tangible asset value per share (cents) 263 260
Depreciation and amortisation (R`000) 121 917 102 648
Capital expenditure (R`000) 224 625 174 300
Capital commitments (R`000) 224 455 246 600
Notes
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 for the year ended 31 August 2009 have been
prepared in accordance with accounting policies that comply with International
Financial Reporting Standards ("IFRS") and the disclosure requirements of
IAS 34, and have been consistently applied with those adopted for the year ended
31 August 2008, except for IFRIC 13 - Customer Loyalty Programmes. The group
adopted IFRIC 13, "Customer Loyalty Programmes", on 1 September 2008.
The interpretation applies to customer loyalty award credits that an entity
grants to its customers as part of a sales transaction, in terms of IAS 18, and
subject to meeting any further qualifying conditions, the customer can redeem
in the future for free or discounted goods or services. The interpretation
requires that an entity recognises credits that it awards to customers as a
separately identifiable component of revenue, which would be deferred at the
date of the initial sale.
The results for the year ended 31 August 2008 have been restated accordingly.
The net impact on the income statement for the year ended 31 August 2008 is a
R1.2 million decrease to profit after tax. The net impact on the balance sheet
as at 31 August 2008 is a R2.9 million decrease in shareholders` equity, and a
R2.9 million increase in total liabilities.
Registered address: Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Directors: DM Nurek* (Chairman), F Abrahams*, JA Bester*, BD Engelbrecht,
MJ Harvey, F Jakoet*, DA Kneale# (Chief Executive Officer), 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: CLS
ISIN: ZAE000134854
This information, together with additional detail is available on the Clicks
Group Limited website: http://www.clicksgroup.co.za
Date: 22/10/2009 08:00:08 Produced by the JSE SENS Department.
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