| Thu 14 Apr 2011, 8:30 | | CLS - Clicks Group - Interim Condensed Consolidated Results for the six months |
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CLS
CLS
CLS - Clicks Group - Interim Condensed Consolidated Results for the six months
ended 28 February 2011
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")
INTERIM CONDENSED CONSOLIDATED RESULTS
For the six months ended 28 February 2011
Retail turnover up 13.5%
Diluted headline EPS up 22.2%
Interim distribution of 37.0 cents
Return on equity increases to 55.8%
COMMENTARY
Overview
The Clicks chain delivered another strong performance in the six months to 28
February 2011 ("the period") in a retail environment where consumers have
remained cautious and value conscious. UPD, the group`s pharmaceutical
wholesaler, maintained market share in a challenging environment.
A feature of the reporting period has been the steady decline in selling price
inflation which measured 2.1% for the six-month period compared to 8.6% in the
prior period.
The group`s diluted headline earnings per share increased by 22.2% to 122.2
cents. The financial performance has been enhanced by the benefits of the
ongoing capital management programme.
Return on equity increased to 55.8% from 46.2% in 2010 and R450 million was
returned to shareholders during the period through a combination of share buy-
backs and distributions.
Management continues to invest in stores, systems and people for longer term
sustainability. A broad-based employee share ownership scheme was introduced to
accelerate transformation and black economic empowerment, as well as to retain
and attract scarce and specialist skills.
Financial performance
Retail turnover increased by 13.5% as a result of the performance from the
Clicks chain. Selling price inflation for the retail businesses was 0.9%
compared to 7.9% in 2010. In this low inflationary environment Clicks showed
strong real sales growth of 14.7% for the period.
UPD increased turnover by 7.6% as price inflation declined to 4.4%.
Group turnover increased by 8.9% to R7.2 billion.
Total income, comprising gross profit and other income, rose by 13.9%.
Operating expenses increased by 13.2%. Retail cost growth of 13.9% was impacted
by the aggressive pharmacy and store expansion programme in Clicks and the
increasing cost of pharmacists. UPD`s cost growth was contained at 5.9%.
Operating margin improved by 50 basis points to 6.5%, resulting in a 16.5%
increase in operating profit to R462 million.
Headline earnings increased by 17.4% to R323 million. Diluted headline earnings
per share continues to benefit from the share buy-back programme and increased
by 22.2% to 122.2 cents. This is in line with the earnings guidance contained in
the group`s trading statement on 24 March 2011.
The interim distribution was increased by 21.3% to 37 cents per share.
Inventory days in stock moved from 56 to 59 days, while inventory levels were
13.5% higher at the end of the reporting period.
The group continues to be highly cash generative with the cash inflow from
operations totalling R396 million for the period. Cash was primarily used for
capital expenditure (R119 million), distributions to shareholders (R199 million)
and share buy-backs (R251 million).
Trading performance
Clicks increased turnover by 15.8% as the brand grew market share across key
merchandise categories. Comparable store sales grew by 12.6%. The opening of a
further 15 dispensaries extended the national pharmacy footprint to 266, while
the store base increased to 382 following the opening of 13 stores. Clicks
lifted operating margin from 6.6% to 7.0% through better margins on front shop
products and further improvements in shrink and waste management. This off-set
the margin dilution of dispensary where Clicks continues to price aggressively.
Operating profit increased by 23.5%.
UPD increased wholesale turnover by 7.6% as the market slowed as a result of
lower inflation and the faster growth in sales of lower value generic medicines.
UPD has maintained its 23.4% share of the private pharmaceutical wholesale
market. Operating profit increased by 1.2%.
Musica`s turnover was 2.5% lower as the CD and DVD markets in the country
continued to decline. Gaming and lifestyle merchandise showed good growth.
Turnover in The Body Shop was 5.2% down as the brand experienced selling price
deflation of 10.0%.
Prospects
The trading environment remains challenging. Selling price inflation is expected
to stay low for the remainder of the financial year while the business faces
continuing inflationary pressures from higher wages and utility costs. UPD is
expected to face a tougher second half as no increase has been granted in the
single exit price (SEP) of medicines for 2011.
However, the group`s focused strategy ensures that the brands remain
competitively advantaged, with good organic growth prospects in the health and
beauty markets.
Full-year earnings forecast
The group currently anticipates that diluted headline earnings per share for the
year to 31 August 2011 will increase by between 17% and 22% over the previous
financial year.
This forecast is based on the following assumptions: The group`s operational and
trading performance for the second half will continue in line with the results
achieved for the period under review; further organic growth will be generated
from store expansion and the opening of additional pharmacies; and there will be
no marked changes in trading conditions, the regulatory environment and in the
macroeconomy that will impact on consumer spending.
Interim distribution
The board of directors has approved an interim distribution of 37.0 cents per
share (2010: 30.5 cents per share). The source of the distribution will be
either from distributable reserves and paid in cash as a dividend or as a
capital reduction out of share premium. The source of the distribution will be
made known on or before Friday, 17 June 2011.
Shareholders are advised of the following salient dates in respect of the
interim distribution:
Last day to trade "cum" the interim distribution Friday, 24 June 2011
Shares trade "ex" the interim distribution Monday, 27 June 2011
Record date Friday, 1 July 2011
Payment in respect of the interim distribution Monday, 4 July 2011
Share certificates may not be dematerialised or rematerialised between Monday,
27 June 2011 and Friday, 1 July 2011, both days inclusive.
By order of the board
David Janks
Company Secretary
14 April 2011
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,
M Fleming (Chief Financial Officer), MJ Harvey, F Jakoet*, DA Kneale#
(Chief Executive Officer), N Matlala*, M Rosen*
* Independent 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
Condensed Statement of Comprehensive Income
Six months
Six months to 28 Feb
to 28 Feb 2010
2011 (unaudited)
R`000 (unaudited) (restated)*
Revenue 7 480 082 6 861 712
Turnover 7 150 949 6 565 754
Cost of merchandise sold (5 485 442) (5 109 066)
Gross profit 1 665 507 1 456 688
Other income 324 266 289 808
Expenses (1 527 472) (1 349 710)
Depreciation and amortisation (72 401) (60 508)
Occupancy costs (208 434) (193 266)
Employment costs (768 469) (694 079)
Other costs (478 168) (401 857)
Operating profit 462 301 396 786
Loss on disposal of property, plant and equipment (2 509) (1 175)
Impairment of intangible asset - -
Profit before financing costs 459 792 395 611
Net financing costs (17 213) (19 379)
Financial income 4 867 6 150
Financial expense (22 080) (25 529)
Profit before taxation 442 579 376 232
Income tax expense (121 690) (103 473)
Profit for the period 320 889 272 759
Other comprehensive income/(loss):
Exchange differences on translation
of foreign subsidiaries 66 (467)
Other comprehensive income/(loss)
for the period, net of tax 66 (467)
Total comprehensive income for the period 320 955 272 292
Profit attributable to:
Equity holders of the parent 320 863 274 109
Non-controlling interest 26 (1 350)
320 889 272 759
Total comprehensive income attributable to:
Equity holders of the parent 320 929 273 642
Non-controlling interest 26 (1 350)
320 955 272 292
Earnings per share (cents) 121.8 100.2
Diluted earnings per share (cents) 121.6 99.7
Year to
31 August
% 2010
R`000 change (audited)
Revenue 9.0 13 912 673
Turnover 8.9 13 276 277
Cost of merchandise sold 7.4 (10 372 685)
Gross profit 14.3 2 903 592
Other income 11.9 626 092
Expenses 13.2 (2 706 412)
Depreciation and amortisation 19.7 (128 095)
Occupancy costs 7.8 (389 746)
Employment costs 10.7 (1 399 378)
Other costs 19.0 (789 193)
Operating profit 16.5 823 272
Loss on disposal of property, plant and equipment (6 476)
Impairment of intangible asset (7 685)
Profit before financing costs 16.2 809 111
Net financing costs (11.2) (38 751)
Financial income 10 304
Financial expense (49 055)
Profit before taxation 17.6 770 360
Income tax expense 17.6 (206 550)
Profit for the period 17.6 563 810
Other comprehensive income/(loss):
Exchange differences on translation
of foreign subsidiaries (1 368)
Other comprehensive income/(loss)
for the period, net of tax (1 368)
Total comprehensive income for the period 562 442
Profit attributable to:
Equity holders of the parent 565 413
Non-controlling interest (1 603)
563 810
Total comprehensive income attributable to:
Equity holders of the parent 564 045
Non-controlling interest (1 603)
562 442
Earnings per share (cents) 21.6 208.6
Diluted earnings per share (cents) 22.0 207.7
* 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
Six months Six months
to 28 Feb to 28 Feb
2011 2010
R`000 (unaudited) (unaudited)
Total profit for the period attributable
to equity holders of the parent 320 863 274 109
Adjusted for:
Loss on disposal of property, plant and equipment 1 806 846
Impairment of intangible asset - -
Headline earnings 322 669 274 955
Headline earnings per share (cents) 122.4 100.5
Diluted headline earnings per share (cents) 122.2 100.0
Year to
31 August
% 2010
R`000 change (audited)
Total profit for the period attributable
to equity holders of the parent 565 413
Adjusted for:
Loss on disposal of property, plant and equipment 4 663
Impairment of intangible asset 5 533
Headline earnings 17.4 575 609
Headline earnings per share (cents) 21.8 212.3
Diluted headline earnings per share (cents) 22.2 211.4
Condensed Consolidated Statement of Cash Flows
Six months Six months Year to
to 28 Feb to 28 Feb 31 August
2011 2010 2010
R`000 (unaudited) (unaudited) (audited)
Operating profit before working
capital changes 503 774 376 681 836 994
Working capital changes 35 495 (324 699) (203 492)
Net interest paid (11 033) (14 291) (25 475)
Taxation paid (131 910) (99 463) (174 930)
Cash inflow/(outflow) from operating
activities before distributions 396 326 (61 772) 433 097
Distributions paid to shareholders (199 112) (162 790) (244 711)
Net cash effects of operating
activities 197 214 (224 562) 188 386
Net cash effects of investing
activities (112 212) (74 586) (210 715)
Capital expenditure (109 270) (84 898) (206 478)
Acquisition of businesses (10 225) - (25 189)
Other investing activities 7 283 10 312 20 952
Net cash effects of financing
activities (196 730) 21 635 (235 373)
Purchase of treasury shares (251 483) (145 101) (321 862)
Other financing activities 54 753 166 736 86 489
Net decrease in cash and cash
equivalents (111 728) (277 513) (257 702)
Condensed Consolidated Statement of Changes in Equity
Six months Six months Year to
to 28 Feb to 28 Feb 31 August
2011 2010 2010
R`000 (unaudited) (unaudited) (audited)
Opening balance 1 141 328 1 125 263 1 125 263
Acquisition of additional interest
in subsidiary - - 4 987
Net cost of own shares purchased (249 520) (136 889) (306 704)
Total comprehensive income for the
period 320 955 272 292 562 442
Share-based payment reserve movement 2 282 301 51
Distributions to shareholders (199 112) (162 790) (244 711)
Total 1 015 933 1 098 177 1 141 328
Distribution per share (cents)
Interim proposed/paid 37.0 30.5 30.5
Final declared/paid - - 75.7
37.0 30.5 106.2
Supplementary Information
As at As at As at
28 February 28 February 31 August
2011 2010 2010
(unaudited) (unaudited) (audited)
Number of ordinary shares in issue
(gross) (`000) 268 303 281 546 284 007
Number of ordinary shares in issue
including "A" shares issued in terms of
employee share
ownership programme (gross) (`000) 297 457 281 546 284 007
Number of ordinary shares in issue
(net of treasury shares) (`000) 260 518 270 609 266 283
Weighted average number of shares in
issue (net of treasury shares) (`000) 263 522 273 555 271 073
Weighted average diluted number of
shares in issue (net of treasury
shares) (`000) 263 945 274 890 272 277
Net asset value per share (cents) 390 406 429
Net tangible asset value per share (cents) 232 256 271
Depreciation and amortisation (R`000) 76 789 64 977 136 775
Capital expenditure (including
acquisition of
businesses) (R`000) 119 495 84 898 231 667
Capital commitments (R`000) 131 730 139 557 249 833
Condensed Consolidated Statement of Financial Position
As at As at As at
28 February 28 February 31 August
2011 2010 2010
R`000 (unaudited) (unaudited) (audited)
Non-current assets 1 378 980 1 333 177 1 383 175
Property, plant and equipment 924 052 840 602 888 053
Intangible assets 307 032 308 233 314 473
Goodwill 103 510 96 124 105 335
Deferred tax assets 28 201 56 539 51 907
Loans receivable 16 185 31 679 23 407
Current assets 2 624 550 2 692 914 2 726 963
Inventories 1 710 711 1 506 827 1 571 248
Trade and other receivables 848 621 891 201 869 279
Loans receivable 15 745 16 842 15 149
Cash and cash equivalents 40 324 132 241 152 052
Derivative financial assets 9 149 145 803 119 235
Total assets 4 003 530 4 026 091 4 110 138
Equity and liabilities
Total equity 1 015 933 1 098 177 1 141 328
Non-current liabilities 254 043 286 281 296 723
Interest-bearing borrowings 10 046 32 082 16 579
Employee benefits 80 172 73 419 96 274
Deferred tax liabilities 42 047 69 547 68 559
Operating lease liability 121 778 111 233 115 311
Current liabilities 2 733 554 2 641 633 2 672 087
Trade and other payables 2 353 250 2 197 512 2 290 883
Employee benefits 155 678 219 556 202 569
Provisions 5 375 5 273 6 244
Interest-bearing borrowings 174 828 194 178 116 592
Income tax payable 38 583 18 839 46 808
Derivative financial liabilities 5 840 6 275 8 991
Total equity and liabilities 4 003 530 4 026 091 4 110 138
Segmental Analysis
The group`s reportable segments under IFRS 8 are as follows:
Clicks (including Clicks Direct Medicines), Musica, The Body Shop and United
Pharmaceutical Distributors (UPD)
Profit
before Total
R`000 Turnover taxation assets
Six months to 28 February 2011 (unaudited)
Clicks 4 912 245 343 449 2 061 176
Musica 527 292 32 994 261 527
The Body Shop 58 868 12 994 26 752
United Pharmaceutical Distributors 2 700 643 72 263 1 887 382
Inter-segmental (1 048 099) 601 (931 689)
Total reportable segmental balance 7 150 949 462 301 3 305 148
Non-reportable segmental balance - (19 722) 698 382
Total group balance 7 150 949 442 579 4 003 530
Six months to 28 February 2010 (unaudited)*
Clicks 4 242 584 278 134 1 813 011
Musica 540 947 36 433 246 350
The Body Shop 62 087 12 643 24 926
United Pharmaceutical Distributors 2 510 600 71 376 1 646 645
Inter-segmental (790 464) (1 800) (692 526)
Total reportable segmental balance 6 565 754 396 786 3 038 406
Non-reportable segmental balance - (20 554) 987 685
Total group balance 6 565 754 376 232 4 026 091
Twelve months to 31 August 2010 (audited)
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
Capital
expendi- Total
R`000 ture liabilities
Six months to 28 February 2011 (unaudited)
Clicks 88 681 1 248 851
Musica 7 119 119 350
The Body Shop 1 173 10 506
United Pharmaceutical Distributors 5 870 1 641 561
Inter-segmental - (917 436)
Total reportable segmental balance 102 843 2 102 832
Non-reportable segmental balance 6 427 884 765
Total group balance 109 270 2 987 597
Six months to 28 February 2010 (unaudited)*
Clicks 57 553 1 100 592
Musica 6 488 120 356
The Body Shop 1 776 11 351
United Pharmaceutical Distributors 6 057 1 542 288
Inter-segmental - (683 884)
Total reportable segmental balance 71 874 2 090 703
Non-reportable segmental balance 13 024 837 211
Total group balance 84 898 2 927 914
Twelve months to 31 August 2010 (audited)
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
As at As at As at
28 Feb 28 Feb 31 August
2011 2010 2010
Non-reportable segmental profit
before taxation consists of: (unaudited) (unaudited) (audited)
Loss on disposal of property, plant
and equipment (2 509) (1 175) (6 476)
Impairment of intangible asset - - (7 685)
Financial income 4 867 6 150 10 304
Financial expense (22 080) (25 529) (49 055)
(19 722) (20 554) (52 912)
* Comparative figures have been restated for the reallocation of the operating
lease liability and certain trade and other receivables and trade and other
payables between Group Services, Clicks, Musica and The Body Shop which is
aligned to the group disclosure at 31 August 2010. Refer to note 1.3.
Notes
1. Accounting policies
1.1 These interim financial results for the six months ended 28 February 2011
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 2010 with the following exception:
During the period, the group adopted the following new and amended IFRS to the
extent that they are applicable to its activities which have had no impact on
the results presented:
- IAS 24 "Related Party Disclosures"
- Annual improvements to IFRS (May 2010)
1.2 The results for the six months ended 28 February 2010 have been restated for
the reclassification of certain expenses between occupancy costs and other costs
within the UPD business which is aligned to the group disclosure at 31 August
2010. The impact on the statement of comprehensive income for the six months
ended 28 February 2010 is a R7.5 million decrease in occupancy costs and a
corresponding increase of R7.5 million in other costs. There is a nil net impact
on the statement of comprehensive income and statement of financial position for
the six months ended 28 February 2010.
1.3 The results as at 28 February 2010 have been restated for the reallocation
of the operating lease liability and certain trade and other receivables and
trade and other payables between Group Services, Clicks, Musica and The Body
Shop which is aligned to the group disclosure at 31 August 2010. The impact on
the disclosure of segmental assets as at 28 February 2010 is a R94.1 million
decrease in trade and other receivables in Group Services and a corresponding
increase of R81.7 million and R12.4 million in Clicks and Musica respectively.
The impact on the disclosure of segmental liabilities as at 28 February 2010 is
the reallocation of operating lease liabilities of R67.0 million from Group
Services to Clicks and a R474.1 million increase in trade and other payables in
Group Services with a corresponding decrease of R469.7 million, R4.2 million and
R0.2 million in Clicks, Musica and The Body Shop respectively. There is a nil
net impact on the statement of financial position as at 28 February 2010.
This information, together with additional detail, is available on the Clicks
Group Limited website: www.clicksgroup.co.za
Date: 14/04/2011 08:30:01 Produced by the JSE SENS Department.
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