| Thu 20 Oct 2011, 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 2011
CLICKS GROUP LIMITED
Registration number: 1996/000645/06
Share code: CLS
ISIN: ZAE000134854
REVIEWED PRELIMINARY GROUP RESULTS
for the year ended 31 August 2011
Retail turnover up 10.9%
Diluted headline EPS up 18.1%
Total distribution of 125.0 cents
Return on equity increases to 62.2%
Consolidated statement of comprehensive income
Year to Year to
31 August 31 August
2011 2010 %
R`000 (reviewed) (audited) change
Revenue 14 800 089 13 912 673 6.4
Turnover 14 102 919 13 276 277 6.2
Cost of merchandise sold (10 879 173) (10 372 685) 4.9
Gross profit 3 223 746 2 903 592 11.0
Other income 688 935 626 092 10.0
Total income 3 912 681 3 529 684 10.9
Expenses (2 975 091) (2 706 412) 9.9
Depreciation and amortisation (149 714) (128 095) 16.9
Occupancy costs (422 596) (389 746) 8.4
Employment costs (1 496 491) (1 399 378) 6.9
Other costs (906 290) (789 193) 14.8
Operating profit 937 590 823 272 13.9
Loss on disposal of property, plant
and equipment (6 250) (6 476)
Impairment of intangible asset - (7 685)
Profit before financing costs 931 340 809 111 15.1
Net financing costs (33 626) (38 751) (13.2)
Financial income 8 235 10 304
Financial expense (41 861) (49 055)
Profit before taxation 897 714 770 360 16.5
Income tax expense (246 749) (206 550) 19.5
Profit for the year 650 965 563 810 15.5
Other comprehensive income/(loss):
Exchange differences on translation
of foreign subsidiaries (220) (1 368)
Cash flow hedges 2 105 -
Change in fair value of effective portion 2 924 -
Deferred tax on movement of
effective portion (819) -
Other comprehensive income/(loss) for
the year, net of tax 1 885 (1 368)
Total comprehensive income for the year 652 850 562 442
Profit attributable to:
Equity holders of the parent 650 932 565 413
Non-controlling interest 33 (1 603)
650 965 563 810
Total comprehensive income
attributable to:
Equity holders of the parent 652 817 564 045
Non-controlling interest 33 (1 603)
652 850 562 442
Earnings per share (cents) 248.3 208.6 19.0
Diluted earnings per share (cents) 248.0 207.7 19.4
Headline earnings reconciliation
Year to Year to
31 August 31 August
2011 2010 %
R`000 (reviewed) (audited) change
Total profit for the year attributable
to equity holders of the parent 650 932 565 413
Adjusted for:
Loss on disposal of property, plant
and equipment 4 500 4 663
Impairment of intangible asset - 5 533
Headline earnings 655 432 575 609 13.9
Headline earnings per share (cents) 250.1 212.3 17.8
Diluted headline earnings per share (cents) 249.7 211.4 18.1
Condensed consolidated statement of financial position
As at As at
31 August 31 August
2011 2010
R`000 (reviewed) (audited)
Non-current assets 1 414 484 1 383 175
Property, plant and equipment 949 906 888 053
Intangible assets 301 579 314 473
Goodwill 103 510 105 335
Deferred tax assets 53 756 51 907
Loans receivable 5 733 23 407
Current assets 2 840 299 2 726 963
Inventories 1 802 557 1 571 248
Trade and other receivables 998 944 869 279
Loans receivable 17 901 15 149
Cash and cash equivalents 17 790 152 052
Derivative financial assets 3 107 119 235
Total assets 4 254 783 4 110 138
Equity and liabilities
Total equity 965 187 1 141 328
Non-current liabilities 264 829 296 723
Interest-bearing borrowings 19 16 579
Employee benefits 92 473 96 274
Deferred tax liabilities 46 695 68 559
Operating lease liability 125 642 115 311
Current liabilities 3 024 767 2 672 087
Trade and other payables 2 431 756 2 290 883
Employee benefits 164 669 202 569
Provisions 5 217 6 244
Interest-bearing borrowings 375 217 116 592
Income tax payable 44 489 46 808
Derivative financial liabilities 3 419 8 991
Total equity and liabilities 4 254 783 4 110 138
Condensed consolidated statement of cash flows
Year to Year to
31 August 31 August
2011 2010
R`000 (reviewed) (audited)
Operating profit before working capital changes 1 075 227 836 994
Working capital changes (105 055) (203 492)
Net interest paid (21 113) (25 475)
Taxation paid (271 988) (174 930)
Cash inflow from operating activities before
distributions 677 071 433 097
Distributions paid to shareholders (295 507) (244 711)
Net cash effects of operating activities 381 564 188 386
Net cash effects of investing activities (209 353) (210 715)
Capital expenditure (215 701) (206 478)
Acquisition of businesses (10 225) (25 189)
Other investing activities 16 573 20 952
Net cash effects of financing activities (306 473) (235 373)
Purchase of treasury shares (552 406) (321 862)
Other financing activities 245 933 86 489
Net decrease in cash and cash equivalents (134 262) (257 702)
Condensed consolidated statement of changes in equity
Year to Year to
31 August 31 August
2011 2010
R`000 (reviewed) (audited)
Opening balance 1 141 328 1 125 263
Acquisition of additional interest in subsidiary - 4 987
Net cost of own shares purchased (549 827) (306 704)
Total comprehensive income for the year 652 850 562 442
Share-based payment reserve movement 16 343 51
Distributions to shareholders (295 507) (244 711)
Total 965 187 1 141 328
Distribution per share (cents)
Interim declared/paid 37.0 30.5
Final proposed/paid 88.0 75.7
125.0 106.2
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
Year to 31 August
2011 (reviewed)
Clicks 9 789 459 750 836 2 234 077
Musica 895 600 31 418 202 074
The Body Shop 107 786 20 575 24 090
United Pharmaceutical
Distributors 5 518 974 130 808 1 951 839
Inter-segmental (2 208 900) 3 953 (835 282)
Total reportable
segmental balance 14 102 919 937 590 3 576 798
Non-reportable
segmental balance - (39 876) 677 985
Total group balance 14 102 919 897 714 4 254 783
Year 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 Total
R`000 expenditure liabilities
Year to 31 August
2011 (reviewed)
Clicks 173 278 1 385 885
Musica 10 520 98 843
The Body Shop 1 797 13 139
United Pharmaceutical
Distributors 10 701 1 651 787
Inter-segmental - (824 381)
Total reportable
segmental balance 196 296 2 325 273
Non-reportable
segmental balance 19 405 964 323
Total group balance 215 701 3 289 596
Year 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
Year to Year to
31 August 31 August
2011 2010
R`000 (reviewed) (audited)
Non-reportable segmental profit before taxation
consists of:
Loss on disposal of property, plant and equipment (6 250) (6 476)
Impairment of intangible asset - (7 685)
Financial income 8 235 10 304
Financial expense (41 861) (49 055)
(39 876) (52 912)
Supplementary information
Year to Year to
31 August 31 August
2011 2010
(reviewed) (audited)
Number of ordinary shares in issue (gross) (`000) 270 652 284 007
Number of ordinary shares in issue including "A"
shares issued in terms of employee share ownership
programme (gross) (`000) 299 805 284 007
Number of ordinary shares in issue (net of
treasury shares) (`000) 252 959 266 283
Weighted average number of ordinary shares in
issue (net of treasury shares) (`000) 262 118 271 073
Weighted average diluted number of shares in issue
(net of treasury shares) (`000) 262 515 272 277
Net asset value per share (cents) 382 429
Net tangible asset value per share (cents) 221 271
Depreciation and amortisation (R`000) 158 285 136 775
Capital expenditure (including acquisition of
businesses) (R`000) 225 926 231 667
Capital commitments (R`000) 257 100 249 833
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 for the year ended 31 August 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 year, the group adopted the following new and amended IFRS to the
extent that they are applicable to its activities:
- IAS 24 "Related Party Disclosures"
- IAS 32, Amendment to IAS 32 "Financial Instruments: Presentation on
Classification of Rights Issues"
- IFRS 2, Amendment to IFRS 2 "Share-based Payment: Group Cash-settled Share-
based Payment Arrangement"
- IFRIC 19 "Extinguishing financial liabilities with equity instruments"
- Annual improvements to IFRS 2009 and 2010
COMMENTARY
Overview
Trading conditions became increasingly challenging during the year and the
group also encountered the high base set in 2010, which included the FIFA 2010
World Cup(TM). Selling price inflation continued to decline and averaged only
1.6% for the year, compared to 5.4% in the previous year, which impacted
turnover growth by almost four percentage points.
In this environment, the Clicks chain reported strong growth in turnover and
operating profit as the brand showed real sales volume growth and continued to
gain market share. The performance of UPD, the group`s pharmaceutical
wholesaler, was negatively impacted by the absence of an increase in the
single exit price (SEP) of medicines by the Department of Health for 2011.
The group continues to be highly cash generative and remains committed to
returning excess capital to shareholders, repurchasing shares totalling R552
million during the year.
Return on shareholders` equity (ROE) increased from 50.8% to 62.2% for the
year, boosted by share buy-backs of approximately R300 million in the last six
weeks of the financial year. Management has increased the medium-term target
for ROE to 55% - 65%.
Financial performance
Retail turnover growth of 10.9% was driven by the strong performance of the
Clicks chain which reported sales growth of 13.0%. Selling price inflation for
the retail businesses was 0.6% for the year compared to 5.4% in 2010. UPD
increased turnover by 4.2% as price inflation in the wholesale business
declined to 3.3%. Group turnover was 6.2% higher at R14.1 billion.
Total income, comprising gross profit and total income, increased by 10.9%.
Operating expenses increased by 9.9%. Expense growth was well contained in the
second half of the year, with retail costs growing by 7.7%. UPD reduced
expenses by 5.6% in the second six months through improved operating
efficiencies, and expenses for the year were 0.1% lower than 2010.
Operating margin improved by 40 basis points to 6.6%, resulting in a 13.9%
increase in operating profit for the period.
Headline earnings increased by 13.9% to R655 million. Diluted headline
earnings rose by 18.1% to 249.7 cents, benefiting from the group`s share buy-
back programme. Diluted HEPS has grown at a compound rate of 28.6% over the
past five years.
A final distribution of 88.0 cents per share has been declared, bringing the
total distribution for the year to 125.0 cents, an increase of 17.7%.
Inventory days in stock moved from 55 to 60 days and inventory levels were
14.7% higher at year-end, mainly as a result of stock levels in UPD returning
to normalised levels.
Cash inflow from operations increased by R244 million over 2010 to R677
million, with R226 million used for capital expenditure and R848 million
returned to shareholders through share buy-backs and distributions.
Trading performance
Clicks posted real sales growth of 12.0% and continued to grow its share of
the increasingly competitive healthcare market. Clicks opened its 400th store
in August 2011 as 31 new outlets were added during the period, the highest
number in a single year. The national pharmacy footprint was extended to 283
with the opening of a further 32 dispensaries. The Clicks operating margin
improved from 6.9% to 7.7% owing to good buying and supply chain management,
while Clicks maintained its aggressive pricing strategy. Operating profit
increased by 25.8%.
Musica`s performance slowed in the second half and turnover for the year was
5.9% lower as the decline in the CD and DVD markets accelerated. Musica
maintained market shares and showed good growth in gaming, technology and
accessories. The Body Shop`s operating profit increased by 3.5% despite the
brand experiencing price deflation of 6.6%.
UPD increased wholesale turnover by 4.2%, impacted by lower inflation, further
decline in independent pharmacies and the changing product mix with faster
growth in sales of lower value generic medicines. Operating profit was 19.4%
lower than the prior year owing to the lack of a trading gain on SEP. Despite
the challenging conditions UPD increased its share of the private
pharmaceutical wholesale market from 22.7% to 23.1%.
Prospects
Consumer spending is expected to remain muted in the current uncertain
economic climate. Inflation is anticipated to remain low and no SEP increase
is expected for 2012. The group will face increasing cost pressures in
employment, property, transport and utilities.
The focus for the year ahead will therefore be on driving volume and
containing costs.
The group remains well positioned in the medium term through the market
leadership and growth potential of its brands.
Capital expenditure of R257 million has been committed for 2012 and trading
space is planned to increase by 4% to 5%.
As a result of the group`s continued strong cash generation, the board has
resolved to reduce the distribution cover from 2.0 to 1.8 times from the 2012
financial year, which will further enhance returns to shareholders.
Shareholder distribution
The board of directors has approved a final distribution of 88.0 cents per
ordinary share (2010: 75.7 cents per share) subject to the approval being
granted by shareholders at the general meeting to be held on 17 January 2012.
The source of the ordinary distribution will be a capital reduction out of
share premium.
In addition the board has approved a distribution of 12.5 cents per ordinary
"A" share. The distribution is declared in terms of the rules of the employee
share ownership programme implemented with effect 2 February 2011 that
entitles the ordinary "A" shareholders to an annual distribution equal to 10%
of the cumulative distribution declared in relation to an ordinary share in a
financial year. The source of the ordinary "A" share distribution will be from
distributable reserves.
Shareholders are advised of the following salient dates relating to the
distributions:
Last day to trade "cum" the distribution Friday, 20 January 2012
Shares trade "ex" the distribution Monday, 23 January 2012
Record date Friday, 27 January 2012
Payment to shareholders Monday, 30 January 2012
Share certificates may not be dematerialised or rematerialised between Monday,
23 January 2012 and Friday, 27 January 2012, both days inclusive.
The directors of the company have determined that dividend cheques amounting
to R50.00 or less due to any one ordinary shareholder will not be paid unless
a written request to the contrary is delivered to the transfer secretaries,
Computershare Investor Services (Proprietary) Limited, by no later than close
of business on Friday, 20 January 2012, being the day that the shares trade
"cum" the distribution. Unpaid dividend cheques will be aggregated with other
such amounts and donated to a charity to be nominated by the directors.
By order of the board
David Janks
Company Secretary
20 October 2011
Registered address: Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Directors: F Abrahams*, JA Bester*, BD Engelbrecht, M Fleming
(Chief Financial Officer), MJ Harvey, F Jakoet*, DA Kneale#
(Chief Executive Officer), N Matlala*, DM Nurek* (Chairman), 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
This information, together with additional detail, is available on the Clicks
Group Limited website: www.clicksgroup.co.za
Date: 20/10/2011 08:30:01 Produced by the JSE SENS Department.
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