| Mon 23 Apr 2001, 0:00 | | New Clicks - Group Results For The Six Months Ende |
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NEW CLICKS HOLDINGS LIMITED
Reg. No. 1996/000645/06
TURNOVER +10.0%
PROFIT AFTER TAX +17.0%
OPERATING PROFIT +16.1%
DILUTED HEADLINE EARNINGS PER SHARE +14.3%
GROUP RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2001
CONSOLIDATED INCOME STATEMENT
Six months to Six months to Year to
28 February 29 February 31 August
2001 2000 % 2000
(unaudited) (unaudited) change (audited)
R'000 R'000 R'000
Turnover 2 268 336 2 062 330 10.0 3 997 525
Operating profit 149 384 128 693 16.1 240 541
Net interest paid 9 017 5 026 79.4 11 271
Profit before tax 140 367 123 667 13.5 229 270
Tax 39 307 37 281 5.4 69 049
Profit after tax 101 060 86 386 17.0 160 221
Goodwill amortised 851 - -
Net profit 100 209 86 386 16.0 160 221
Headline earnings
per share (cents)
Undiluted 34.9 30.2 15.6 55.8
Diluted 32.7 28.6 14.3 52.5
Earnings per share (cents)
Undiluted 34.6 30.2 14.6 55.8
Diluted 32.4 28.6 13.3 52.5
Distribution
per share (cents)
Interim 8.6 7.6 13.2 7.6
Final 10.4
Total 18.0
Notes:
1. The comparative figures have been restated in accordance with the accounting
standard AC102. In line with this accounting standard the group changed its
accounting policy in August 2000 and raised a deferred tax asset relating to
trademarks.
2. In accordance with the new accounting standards, the group's accounting
policy for intangible assets has been changed for the current financial year to
amortise goodwill and intangibles over their estimated useful lives. Intangible
assets were previously written off against share premium and reserves.
SUPPLEMENTARY INFORMATION
Other than note 2 above the same accounting policies have been applied as in
the most recent financial statements.
As at As at As at
28 February 29 February 31 August
2001 2000 2000
Ordinary shares in issue ('000) 290 438 286 976 288 399
Weighted average number of shares
in issue ('000) 289 266 286 120 286 881
Weighted average diluted number of
shares in issue ('000) 308 982 302 449 305 249
Compulsorily convertible debentures
issued ('000) 6 500 6 500 6 500
Net asset value per share (cents) 317 282 287
Net tangible asset value
per share (cents) 294 282 287
Depreciation (R'000) 34 488 27 755 58 025
Capital expenditure (R'000) 56 128 48 811 220 433
Capital commitments (R'000) 139 361 61 097 226 675
CONSOLIDATED BALANCE SHEET
As at As at As at
28 February 29 February 31 August
2001 2000 2000
(unaudited) (unaudited) (audited)
R'000 R'000 R'000
ASSETS
Non-current assets
Fixed assets 511 028 354 480 491 581
Goodwill 67 245 - -
Loans and investments 181 374 147 497 142 232
Deferred tax 47 726 53 368 48 353
807 373 555 345 682 166
Current assets 962 941 965 106 1 045 016
Inventories 789 128 761 779 742 010
Accounts receivable 95 777 86 008 96 676
Bank balances and cash 78 036 117 319 206 330
Total assets 1 770 314 1 520 451 1 727 182
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' interest 920 147 810 525 827 555
Minority interests - 63 -
Non-current liabilities
Compulsorily convertible debentures - 20 800 -
Interest-bearing liabilities 172 549 91 573 178 386
1 092 696 922 961 1 005 941
Current liabilities 677 618 597 490 721 241
Accounts payable 630 388 550 716 594 845
Compulsorily convertible debentures 20 800 - 20 800
Short-term borrowings - - 49 125
Tax 17 688 40 303 47 473
Dividends 8 742 6 471 8 998
Total equity and liabilities 1 770 314 1 520 451 1 727 182
CHANGES IN EQUITY
Six months to Six months to Year to
28 February 29 February 31 August
2001 2000 2000
R'000 R'000 R'000
Increase in share capital and premium 19 238 15 206 29 018
(Decrease)/increase in share
distribution reserve (4 760) (925) 4 803
Decrease in non-distributable reserve (1 767) (3 704) (11 577)
Deferred tax on write-off of
intangible assets 4 650 4 713 9 300
Net profit for the period 100 209 86 386 160 221
Distribution to shareholders (24 978) (21 810) (51 804)
Net increase in shareholders' funds 92 592 79 866 139 961
Opening shareholders' interest 827 555 730 659 730 659
920 147 810 525 870 620
Goodwill and trademarks written off - - (43 065)
Closing shareholders' interest 920 147 810 525 827 555
CONSOLIDATED CASH FLOW STATEMENT
Six months to Six months to Year to
28 February 29 February 31 August
2001 2000 2000
(unaudited) (unaudited) (audited)
R'000 R'000 R'000
Net cash flow from operations 184 179 158 415 302 132
Movement in working capital (11 308) (196 419) (152 152)
Finance costs (9 017) (5 026) (11 271)
Tax paid (64 443) (27 678) (47 263)
Cash flow from operating activities 99 411 (70 708) 91 446
Dividends paid (10 756) (7 999) (15 925)
Net cash effects of
operating activities 88 655 (78 707) 75 521
Net cash flow utilised in
investing activities (163 852) (53 463) (251 333)
(75 197) (132 170) (175 812)
Net cash effects of
financing activities (2 954) (2 087) 81 441
Change in net cash resources (78 151) (134 257) (94 371)
SEGMENTAL AND GEOGRAPHICAL ANALYSIS
Six months to Six months to
28 February 29 February
2001 2000 %
R'000 R'000 change
Turnover
Clicks 1 206 699 1 071 864 12.6
Diskom 333 722 317 503 5.1
Music division 191 347 175 898 8.8
South African operations 1 731 768 1 565 265 10.6
Australian operations 536 568 497 065 7.9
Total 2 268 336 2 062 330 10.0
Operating profit before
interest and tax
Clicks 113 697 91 152 24.7
Diskom 5 469 10 434 (47.6)
Music division 6 658 6 457 3.1
South African operations 125 824 108 043 16.5
Australian operations 23 560 20 650 14.1
Total 149 384 128 693 16.1
Turnover
Group turnover grew by 10%. Adjusting for the change in the basis of the
reported turnover in Australia, arising from the introduction of GST, the
turnover growth of the group was 12.6%.
Review of trading
In difficult trading conditions the group has achieved satisfactory results and
has increased the operating profit margin from 6.24% to 6.59%. Strong working
capital focus has resulted in a R99 million positive operating cash flow for
the six months. The strategic focus of growing the group organically as well as
through acquisitions, has continued and during the period under review 39 new
stores were opened, of which 12 are in Australia. 35 new stores are planned for
the half-year to August 2001 which will take the total number of stores in the
group, inclusive of the newly acquired House and Modisons, to 790. The sharp
rise in net interest paid has resulted in the main from the funding of the R90
million distribution centre in Midrand and the payment for the acquisition of
House.
Acquisitions
During the period under review, two acquisitions were made; in Australia,
House, a homewares franchise chain comprising 66 stores, was acquired,
effective from 5 December 2000. The cost of this acquisition, which was funded
in cash mainly from South Africa, was R68 million. In South Africa, the
Durban-based Modisons group, comprising 11 company-owned and franchised stores,
has been acquired, effective from 1 March 2001, for R20 million.
The group also entered into an agreement to acquire Hercol, a media company
listed on the JSE Securities Exchange South Africa. The strategic purpose of
this acquisition was for the group to further expand into alternative
distribution channels using the ClubCard database. However, as a result of the
financial and legal due diligence investigation, the group resiled from the
agreement in terms of its rights. This decision has been disputed by Hercol and
is being taken to arbitration in May.
Healthcare
A separate statement detailing these strategies and initiatives accompanies
this profit announcement.
Distribution
During the year to August 2000, the new distribution facility in Midrand was
commissioned and the extension of the Montague Gardens distribution centre in
Cape Town was completed. While the enhancement of these distribution facilities
has resulted in increases in costs and interest during the implementation
phase, our results are already beginning to reflect significant improvements in
efficiencies and stock turns. This project is on track and by August this year
the target level of 70% of local merchandise will be centrally distributed in
South Africa.
Compulsorily convertible debentures
The 6.5 million compulsorily convertible debentures, which were issued on 19
March 1996 at a price of 320 cents, were converted into ordinary shares, on a
one-to-one basis, on 16 March 2001.
Divisional overview
Clicks
Clicks has continued to expand its store base and market share with the smaller
format Clicks store creating significant opportunities for growth. There are
now in excess of 2.8 million ClubCard members. This database is being used to
enhance the relationship with our customers through direct marketing
activities. For the period to February 2001 existing stores turnover grew by
7.1% and all stores by 12.6%.
Current number of stores 232
Contribution to group turnover 53%
Diskom
The acquisition of Modisons has been the catalyst in the process of
repositioning the underperforming Diskom brand. This project is well under way
and will be completed in the second half of the financial year. In a market
affected by fundamental changes, Diskom's existing stores turnover increased by
1.5% and all stores by 5.1%.
Current number of stores 200
Contribution to group turnover 15%
Music Division - Musica and Compact Disc Wherehouse
Musica has further improved its market share in an industry which reflected a
declining trend in the period under review. The Compact Disc Wherehouse will be
opening its first outlet in Cape Town, at the Waterfront, in August 2001.
Existing stores turnover growth for the music division was 0.2% and all stores
grew by 8.8%.
Current number of stores 134
Contribution to group turnover 8%
Priceline
Strong growth in the store base and market share has continued in a difficult
trading environment. 12 new stores were opened in the period under review.
Adjusting for the impact of GST the existing stores turnover growth was 6.6%
and that of all stores 18.5%.
Current number of stores 113
Contribution to group turnover 24%
House
Following the acquisition of House, the initial focus has been on the
integration of this trading brand into the group. Rapid growth will result in
an increasing number of stores and will become a significant profit contributor
in the Australian operations. These stores will mainly be franchised.
Prospects
The difficult conditions facing retailers in both South Africa and Australia
have led to intense focus within the trading and operating divisions on the key
areas of the businesses both from an operational and strategic perspective.
Although conditions are expected to remain challenging there has been
improvement in the turnover performance of the South African chains in recent
months and the launch of the Priceline ClubCard loyalty programme in June will
have a positive effect on performance in Australia. For the year to August
2001, given the difficult trading environment, the group is confident that its
performance will be ahead of the sector. Our strategies of people development,
new store growth, margin improvement, centralised distribution, the focus on
healthcare and the use of technology to enhance efficiencies continue to be key
in taking the group forward.
STRATE
The company, as part of the JSE Securities Exchange South Africa initiative to
move to an electronic settlement environment for share transactions, will be
going onto the STRATE system on 27 August.
Capitalisation issue and interim dividend
The directors have resolved to award capitalisation shares to ordinary
shareholders registered in the books of the company at the close of business on
Friday, 18 May 2001. Shareholders will be given the opportunity to decline the
award of capitalisation shares in respect of all or any part of their
shareholding and to receive an interim cash dividend of 8.6 cents per share.
The terms of the award of the capitalisation shares will be published on or
about 15 May 2001 and a circular and form of election will be posted to
shareholders on 25 May 2001.
By order of the Board
Allan Scott
Company Secretary
23 April 2001
Directors: D.M. Nurek*, T.C. Honneysett, R.B. Godfrey, P.W.G. Green, E. Osrin*,
P.E.I. Swartz*, W.S.G. Batts*+, M.C. Henkel*+ * non-executive + alternate
Transfer Secretaries: Mercantile Registrars Limited, 6th Floor, Mercantile
Building, 94 President Street, Johannesburg 2001. PO Box 1053, Johannesburg 200
Sponsoring Broker: Investec Securities Limited
Registered Address: Cnr Searle and Pontac Streets, Cape Town 8001. PO Box 5142,
Cape Town 8000
Visit our website to view interim results: http://www.nuclicks.co.za
NEW CLICKS HOLDINGS LIMITED
Reg. No. 1996/000645/06
HEALTHCARE ANNOUNCEMENT
"A new paradigm in pharmacy which will result in high levels of service,
counselling and low prices to the end consumer."
"Healthcare should be affordable and accessible to all South Africans."
Stakeholders are referred to New Clicks Holdings' annual report for the year
2000, in which we declared healthcare as a strategic initiative of major
importance for the long-term future of the group.
BACKGROUND
* The Clicks organisation was founded by Jack Goldin in 1968 with a view to
emulating the then newly-formed drugstore chains in the United States. It is
currently not possible for companies such as ourselves to own pharmacies by
reason of pharmacy legislation in South Africa which prohibits non-pharmacist
ownership of retail pharmacies.
* Our core competencies lie in the merchandise categories of Health, Home and
Beauty. There are currently in excess of 400 Clicks and Diskom stores, which
provide the ideal platform for the inclusion of pharmacy.
* Government has identified the need for statutory reform and we hope that
non-pharmacist ownership of retail pharmacies will become a reality in the
short term.
* There are compelling examples of successful corporate/pharmacist partnerships
and co-ownership models in other parts of the world. We have studied these
examples and we believe we are well-placed to emulate these in South Africa
once the law so permits.
* We believe that the professional and commercial aspects of pharmacy should be
separated. Pharmacists assume responsibility for the control and dispensing of
medicines. They also fulfil an important counselling role to the community on
healthcare matters and encourage the safe and efficacious use of medicines. By
assisting pharmacists to conduct their retail operations, they are released to
utilise their professional skills for the benefit of the communities they serve
NEW CLICKS HOLDINGS AS A SUPPLIER OF FUNDING, GOODS AND SERVICES
New Clicks Holdings has invested heavily in the development of a sophisticated,
world-class infrastructure in supply chain management, centralised distribution
and information technology. As a result of this investment, the group is able
to supply goods, funding and support services to stores in the areas of our
core competencies of Health, Home and Beauty. We envisage that in the future
these stores could be either wholly-owned, operated as joint ventures, or
franchised. We are accordingly able to service pharmacies and other businesses
that we do not own.
PHARMACY SUPPORT INITIATIVES
Pending the legislative process, we have been pursuing a healthcare strategy
over the past two years, and are pleased to report the following progress:
Franchise model: Link Investment Trust
In August 1999, the group acquired a 30% stake in the Link Investment Trust,
the franchisor entity for the Link group which has a membership in excess of
300 pharmacies throughout the country. In March 2001 we acquired a further 26%.
We are currently working together with the franchisees on the way forward. Our
primary objective is to add value to their pharmacies.
New flagship pharmacy chain
We have also been working on a project to sponsor the creation of a flagship
pharmacy chain with dedicated and entrepreneurial pharmacists who share our
vision for a corporate professional partnership to change the pharmacy paradigm
in this country. This project became a reality at the end of March 2001 when
the South African Pharmacy Council agreed to register the flagship pharmacy
company.
This new company, Purchase Milton & Associates, is owned by pharmacists, with
Trevor Milton as managing director. Purchase Milton & Associates, together with
similar companies in the course of registration, is in the process of
acquiring several well-known pharmacies and groups of pharmacies, including
Hyperpharm group (17 stores), Guardian group (6 stores), Galleria group (3
stores), Pharmarama group (12 stores), as well as several other well-known
independent pharmacies throughout South Africa.
By virtue of the arrangements between the parties, New Clicks becomes the owner
of the pharmacies, subject to certain conditions, when the law makes provision
for this eventuality.
The New Clicks group will advance approximately R200-million over the next
twelve months to allow for the acquisition of the selected pharmacies which, it
is expected, will yield an annual turnover of approximately R750-million. The
loan terms are market-related and secured by way of notarial bonds and other
securities approved of by the pharmacy authorities.
Pending a change in the law allowing for ownership by New Clicks, there are
compelling opportunities to rationalise these pharmacy operations and to
improve their performance. New Clicks will be remunerated for its inputs and
services on a fair, market-related basis within the confines of the existing
pharmacy laws.
These inputs and services include:
* Assistance with marketing, advertising, promotions and point-of-sale, through
our in-house advertising agency and expertise in Customer Relationship
Management;
* The establishment and development of an integrated, state-of-the-art IT
platform;
* The co-ordination and centralisation of buying to take advantage of economies
of scale;
* Wholesale and related logistical services;
* The sponsorship of training programmes and opportunities in line with
successful corporate/pharmacist partnerships and co-ownership models overseas;
* Funding.
BENEFITS TO STAKEHOLDERS, THE PARMACY PROFESSION AND THE GENERAL PUBLIC
These initiatives create the prospect of a single, leading brand for pharmacy
and pharmaceutical services nationwide, placing us in an optimal position to
take advantage of and contribute towards developments in the pharmacy
profession for the benefit of our investors and all other stakeholders.
Our vision is for a network of pharmacies, offering high levels of service,
counselling and lower prices. The long-term impact of the healthcare division
on the earnings of the group will be substantial.
The access to capital and training provided by corporate involvement will
create huge scope for economic empowerment and ownership or co-ownership of
pharmacies by aspirant pharmacists from previously disadvantaged backgrounds.
Efficiencies in the total supply-chain through our infrastructure will benefit
retail pharmacies and suppliers. These benefits, as well as the ability to
purchase medication in bulk for a large number of outlets will result in lower
prices to the end-consumer. We have been able to achieve this in the categories
in which we currently trade and believe that this can be extended to medicines
as well.
We believe that healthcare should be affordable and accessible to all South
Africans and that these initiatives put us well on the road to achieving these
objectives.
23 April 2001
Directors: D.M. Nurek*; T.C. Honneysett; R.B. Godfrey; P.W.G. Green;
E. Osrin*; P.E.I. Swartz*; W.S.G. Batts* (alt); M.C. Henkel* (alt).
*non-executive
