| Thu 21 Oct 2010, 8:30 | | 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 2010
CLICKS GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1996/000645/06
JSE share code: CLS
ISIN: ZAE000134854
("Clicks Group" or "the group")
Reviewed Preliminary Group Results for the year ended 31 August 2010
Retail turnover up 14.7%
Diluted headline EPS up 27.4%
Total distribution of 106.2 cents
Return on equity increases to 50.8%
Commentary
Overview
Clicks Group produced another strong performance for the year and entrenched its
leadership position across the health and beauty markets.
The Clicks chain continued to deliver excellent real growth in an overall retail
environment that remained challenging throughout the year, with little sign of
any turnaround in consumer spending.
Diluted headline earnings per share increased by 27.4% to 211.4 cents per share
through improved trading and efficient margin management.
Return on shareholders` equity (ROE) exceeded 50% for the first time, increasing
from 42.3% to 50.8% for the year. Management has set a revised medium-term
target for ROE of 50% - 60%.
Financial performance
Retail turnover increased by 14.7% to R9.7 billion, driven mainly by the
performance of Clicks stores which grew turnover by 16.7%. Along with the tough
economic climate, there was also a marked decline in selling price inflation
which measured 5.4% for the retail businesses compared to 8.6% in 2009.
UPD increased turnover by 5.2% (and by 12.2% on a comparable basis as
distribution agency sales generated by UPD are no longer reflected in turnover).
Price inflation was 5.5%.
Group turnover rose by 9.0% to R13.3 billion.
Total income, comprising gross profit and other income, increased by 14.5% to
R3.5 billion.
Operating expenses increased by 14.1%. Retail costs were 14.6% higher, impacted
by the continued investment in stores and dispensaries and higher performance-
related costs which were partially off-set by the increase in the valuation of
the share incentive hedge. Excluding these costs, underlying retail cost growth
was 10.0%.
Operating margin improved from 5.8% to 6.2%, translating into a 16.1% increase
in operating profit to R823 million.
Headline earnings increased 20.3% to R576 million. Diluted headline earnings per
share continued to benefit from the share buy-back programme and increased 27.4%
to 211.4 cents per share. Diluted HEPS has grown at a compound rate of 29.8%
over the past five years.
A final distribution of 75.7 cents per share has been declared, resulting in a
total distribution of 106.2 cents for the year, an increase of 26.4% over the
previous year. Distribution cover has been maintained at two times headline
earnings.
Inventory days in stock were 55 (2009: 54) and inventory levels were 10.5%
higher at year-end owing mainly to the earlier buying of Christmas stock in
Clicks.
The group generated normalised cash flow from operations of R744 million, with
R231 million invested in capital expenditure and R567 million returned to
shareholders in distributions and share buy-backs.
Trading performance
Clicks increased turnover by 16.7% and recorded market share gains across all
core merchandise categories. Comparable store sales grew by 12.8%. Clicks
expanded its pharmacy network to 251 following the opening of 44 dispensaries
during the year. A net 23 stores were opened, bringing the store base to 369.
The Clicks ClubCard loyalty programme passed the 3 million customer mark during
the year. Operating profit increased by 27.3% due to continued improvements in
both supply chain and shrink and waste management.
UPD grew wholesale turnover by 12.2%, with strong increases in sales to Clicks
and Link pharmacies. Operating profit declined by 7.2% owing to the lower
increase granted on the single exit price of medicines in 2010 compared to 2009.
UPD has maintained its leadership position in the private pharmaceutical
wholesale and distribution market with a share of 23.7%.
Musica increased turnover by 0.5% as discretionary spending in the entertainment
market remained muted. The brand remains the country`s leading music and
entertainment retailer with commanding market shares in CDs and DVDs. Operating
margin improved by 20 basis points to 5.5%.
The Body Shop benefited from new store openings and increased turnover by 5.2%.
The strengthening of the Rand contributed to a 21.6% growth in operating profit.
Prospects
Management remains cautious on the outlook for the recovery in consumer spending
in the year ahead. Trading for the first seven weeks of the new financial year
has continued in line with the performance in the second half of the 2010
financial year.
Selling price inflation is expected to remain in mid-single digits during the
new financial year. The group will continue to invest for longer term growth and
capital expenditure of R250 million has been committed for 2011, with trading
space planned to increase by 4% to 5%.
The strategic objectives of pre-eminence in health and beauty retailing and pre-
eminence in healthcare supply and pharmacy management remain core to the future
of the business. The group is well positioned for growth through the expansion
of the Clicks store and pharmacy network, new revenue opportunities in UPD and
organic growth in the health and beauty markets.
The group`s medium-term operating margin target has been increased to 6.0% -
7.0% to reflect improved performance and prospects.
Shareholder distribution
The board of directors has approved a final distribution of 75.7 cents per share
(2009: 59.5 cents per share). The source of the distribution will be a capital
reduction out of share premium as per the approval given by shareholders at the
annual general meeting held on Monday, 18 January 2010.
The table below sets out the unaudited pro forma financial effects of the final
distribution on the Clicks Group, based on the assumptions set out below. The
final distribution will only have an effect on the Clicks Group net asset value
and tangible net asset value. Because of the basis of this calculation, the net
asset value and net tangible asset value may not necessarily provide a fair
reflection of the group`s net asset value and net tangible asset value after the
implementation of the final distribution. The pro forma financial effects are
the responsibility of the board and have been prepared for illustrative purposes
only.
As at Pro forma
31 August after
2010 Pro forma the final Change
(reviewed) adjustment1 distribution (%)
Net asset value per
share (cents) 429.0 (75.7) 353.3 (17.6)
Net tangible asset
value per share (cents) 271.0 (75.7) 195.3 (27.9)
No. of shares in
issue (net of
treasury shares)(`000) 266 283 - 266 283 -
1 Adjustments to the net asset value per share and the net tangible asset value
per share have been made on the assumption that the final distribution of 75.7
cents per share was paid on 31 August 2010.
Shareholders are advised of the following salient dates relating to the
distribution:
Last day to trade "cum" the distribution Friday, 21 January 2011
Shares trade "ex" the distribution Monday, 24 January 2011
Record date Friday, 28 January 2011
Payment to shareholders Monday, 31 January 2011
Share certificates may not be dematerialised or rematerialised between Monday,
24 January 2011 and Friday, 28 January 2011, both days inclusive.
By order of the board
David Janks
Company Secretary
21 October 2010
Condensed statement of comprehensive income
Year to
Year to 31 August
31 August 2009
2010 (audited) %
R`000 (reviewed) (restated)* change
Revenue 13 912 673 12 754 202 9.1
Turnover 13 276 277 12 175 312 9.0
Cost of merchandise sold (10 372 685) (9 657 930) 7.4
Gross profit 2 903 592 2 517 382 15.3
Other income 626 092 564 482 10.9
Expenses (2 706 412) (2 372 694) 14.1
Depreciation and amortisation (128 095) (113 665) 12.7
Occupancy costs (389 746) (338 786) 15.0
Employment costs (1 399 378) (1 156 928) 21.0
Other costs (789 193) (763 315) 3.4
Operating profit 823 272 709 170 16.1
Loss on disposal of property, plant and
equipment (6 476) (7 177)
Impairment of intangible assets (7 685) -
Profit before financing costs 809 111 701 993 15.3
Net financing costs (38 751) (54 773) (29.3)
Financial income 10 304 14 408
Financial expense (49 055) (69 181)
Profit before taxation 770 360 647 220 19.0
Income tax expense (206 550) (174 619) 18.3
Profit for the year 563 810 472 601 19.3
Other comprehensive loss:
Exchange differences on translation of
foreign subsidiaries (1 368) (285)
Other comprehensive loss for the year,
net of tax (1 368) (285)
Total comprehensive income for the year 562 442 472 316
Profit attributable to:
Equity holders of the parent 565 413 472 387
Non-controlling interest (1 603) 214
563 810 472 601
Total comprehensive income
attributable to:
Equity holders of the parent 564 045 472 102
Non-controlling interest (1 603) 214
562 442 472 316
Earnings per share (cents) 208.6 165.6 26.0
Diluted earnings per share (cents) 207.7 163.8 26.8
Distributions per share (cents)
Interim paid 30.5 24.5 24.5
Final declared/paid 75.7 59.5 27.2
106.2 84.0 26.4
* Comparative figures have been restated for the reclassification of certain
expenses between occupancy costs and other costs within the UPD business. Refer
to note 1.2.
Headline earnings reconciliation
Year to Year to
31 August 31 August
2010 2009 %
R`000 (reviewed) (audited) change
Total profit for the year attributable to
equity holders of the parent 565 413 472 387
Adjusted for:
Loss on disposal of property, plant and
equipment 4 663 6 100
Impairment of intangible assets 5 533 -
Headline earnings 575 609 478 487 20.3
Headline earnings per share (cents) 212.3 167.7 26.6
Diluted headline earnings per share (cents) 211.4 165.9 27.4
Condensed consolidated statement of changes in equity
Year to Year to
31 August 31 August
2010 2009
R`000 (reviewed) (audited)
Opening balance 1 125 263 1 141 604
Acquisition of subsidiary - non-controlling interest - 1 925
Acquisition of additional interest in
subsidiary/(option in subsidiary) 4 987 (4 987)
Share cancellation expenses written off - (99)
Net cost of own shares purchased (306 704) (295 114)
Total comprehensive income for the year 562 442 472 316
Share-based payment reserve movement 51 717
Distributions to shareholders (244 711) (191 099)
Total 1 141 328 1 125 263
Condensed consolidated statement of financial position
As at As at
31 August 31 August
2010 2009
R`000 (reviewed) (audited)
Non-current assets 1 383 175 1 361 915
Property, plant and equipment 888 053 829 513
Intangible assets 314 473 302 313
Goodwill 105 335 96 124
Deferred tax assets 51 907 88 243
Loans receivable 23 407 45 722
Current assets 2 726 963 2 819 291
Inventories 1 571 248 1 421 496
Trade and other receivables 869 279 908 398
Loans receivable 15 149 11 342
Cash and cash equivalents 152 052 409 754
Derivative financial assets 119 235 68 301
Total assets 4 110 138 4 181 206
Equity and liabilities
Total equity 1 141 328 1 125 263
Non-current liabilities 296 723 317 753
Interest-bearing borrowings 16 579 37 428
Employee benefits 96 274 91 134
Deferred tax liabilities 68 559 83 351
Operating lease liability 115 311 105 840
Current liabilities 2 672 087 2 738 190
Trade and other payables 2 290 883 2 408 117
Employee benefits 202 569 240 596
Provisions 6 244 6 254
Interest-bearing borrowings 116 592 29 877
Income tax payable 46 808 33 316
Derivative financial liabilities 8 991 20 030
Total equity and liabilities 4 110 138 4 181 206
Condensed consolidated statement of cash flows
Year to Year to
31 August 31 August
2010 2009
R`000 (reviewed) (audited)
Operating profit before working capital changes 836 994 825 407
Working capital changes (203 492) 489 583
Net interest paid (25 475) (28 337)
Taxation paid (174 930) (229 158)
Cash inflow from operating activities before
distributions 433 097 1 057 495
Distributions paid to shareholders (244 711) (191 099)
Net cash effects of operating activities 188 386 866 396
Net cash effects of investing activities (210 715) (218 630)
Acquisition of businesses (25 189) (9 924)
Capital expenditure (206 478) (224 625)
Other investing activities 20 952 15 919
Net cash effects of financing activities (235 373) (339 151)
Purchase of treasury shares (321 862) (337 501)
Other financing activities 86 489 (1 650)
Net (decrease)/increase in cash and cash equivalents (257 702) 308 615
Segmental analysis
The group has adopted IFRS 8 "Operating Segments" with effect from 1 September
2009. IFRS 8 requires operating segments to be identified on the basis of
internal reports about components of the group that are regularly reviewed by
the board of directors (identified as the chief operating decision-maker of the
group in terms of IFRS 8 requirements) in order to allocate resources to the
segments and to assess their performance. The group`s reportable segments under
IFRS 8 are therefore as follows:
Clicks (including Clicks Direct Medicines), Musica, The Body Shop and United
Pharmaceutical Distributors (UPD).
Profit
before Total
R`000 Turnover taxation assets
Year to 31 August 2010 (reviewed)
Clicks 8 664 788 596 719 2 062 360
Musica 952 133 52 495 223 701
The Body Shop 110 948 19 871 20 718
United Pharmaceutical Distributors 5 298 670 162 200 1 541 676
Inter-segmental (1 750 262) (8 013) (669 925)
Total reportable segmental balance 13 276 277 823 272 3 178 530
Non-reportable segmental balance - (52 912) 931 608
Total group balance 13 276 277 770 360 4 110 138
Year to 31 August 2009 (reviewed)
Clicks 7 424 362 468 875 1 684 468
Musica 947 773 50 422 219 748
The Body Shop 105 432 16 338 22 079
United Pharmaceutical Distributors 5 037 215 174 775 1 741 220
Inter-segmental (1 339 470) (1 240) (765 850)
Total reportable segmental balance 12 175 312 709 170 2 901 665
Non-reportable segmental balance - (61 950) 1 279 541
Total group balance 12 175 312 647 220 4 181 206
Capital ex- Total
R`000 penditure liabilities
Year to 31 August 2010 (reviewed)
Clicks 148 034 1 465 247
Musica 17 180 137 613
The Body Shop 3 146 11 228
United Pharmaceutical Distributors 18 200 1 366 090
Inter-segmental - (655 071)
Total reportable segmental balance 186 560 2 325 107
Non-reportable segmental balance 19 918 643 703
Total group balance 206 478 2 968 810
Year to 31 August 2009 (reviewed)
Clicks 128 882 1 153 545
Musica 16 068 128 372
The Body Shop 1 548 13 414
United Pharmaceutical Distributors 37 432 1 732 311
Inter-segmental - (759 008)
Total reportable segmental balance 183 930 2 268 634
Non-reportable segmental balance 40 695 787 309
Total group balance 224 625 3 055 943
As at As at
31 August 31 August
2010 2009
R`000 (reviewed) (audited)
Non-reportable segmental profit before taxation
consists of:
Loss on disposal of property, plant and equipment (6 476) (7 177)
Impairment of intangible assets (7 685) -
Financial income 10 304 14 408
Financial expense (49 055) (69 181)
(52 912) (61 950)
Supplementary information
As at As at
31 August 31 August
2010 2009
(reviewed) (audited)
Number of ordinary shares in issue (gross) (`000) 284 007 302 841
Number of ordinary shares in issue (net of treasury
shares) (`000) 266 283 276 306
Weighted average number of shares in issue (net of
treasury shares) (`000) 271 073 285 249
Weighted average diluted number of shares in issue
(net of treasury shares) (`000) 272 277 288 349
Net asset value per share (cents) 429 407
Net tangible asset value per share (cents) 271 263
Depreciation and amortisation (R`000) 136 775 121 917
Capital expenditure (including acquisition of
business) (R`000) 231 667 234 549
Capital commitments (R`000) 249 833 224 455
Notes
Auditor`s preliminary report
1.1 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 2010 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 2009 with the following exception:
During the year, the group adopted the following new and amended IFRS to the
extent that they are applicable to its activities:
- IAS 1 "Presentation of Financial Statements"
- IAS 23 "Borrowing Cost"
- IAS 27 "Consolidated and Separate Financial Statements"
- IFRS 3 "Business Combinations"
- IFRS 7 "Financial Instruments"
- IFRS 8 "Operating Segments"
- Annual improvements to IFRS (2008 and 2009)
1.2 The results for the year ended 31 August 2009 have been restated for the
reclassification of certain expenses between occupancy costs and other costs
within the UPD business. The impact on the statement of comprehensive income for
the year ended 31 August 2009 is a R13.3 million decrease in occupancy costs and
a corresponding increase of R13.3 million in other costs. There is a nil net
impact on the statement of comprehensive income and statement of financial
position for the year ended 31 August 2009.
Registered address: Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Directors: F Abrahams*, JA Bester*, BD Engelbrecht, MJ Harvey, F Jakoet*,
DA Kneale# (Chief Executive Officer), N Matlala*, DM Nurek* (Chairman),
M Rosen*, KDM Warburton (Chief Financial Officer) * Independent non-executive
# British
Company secretary: DW Janks
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:
www.clicksgroup.co.za
Date: 21/10/2010 08:30:01 Produced by the JSE SENS Department.
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