| Mon 14 Oct 2002, 14:57 | | New Clicks Holdings - Reviewed Group Results |
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New Clicks Holdings - Reviewed Group Results for the year ended 31 August 2002
New Clicks Holdings
(Registration Number 1996/000645/06) Share Code: NCL ISIN: ZAE000014585
Reviewed group results
for the year ended 31 August 2002
Financial highlights
Turnover + 25.7%
operating profit + 21.3%
headline earnings + 23.6%
diluted headline earnings per share + 21.9%
Consolidated income statement
2002 2001 Percentage
Note R`000 R`000 change
Turnover 5 487 791 4 365 203 25.7
Operating profit 560 262 614 21.3
Net interest paid 21 695 19 997 8.5
Net profit before exceptional items 296 865 242 617 22.4
Exceptional items
Goodwill amortised 11 346 23 552
Provision for impairment of loan 1 78 000 -
Profit before tax 207 519 219 065 -5.3
Tax 61 319 70 951 -13.6
Net profit 146 200 148 114 -1.3
Exceptional items
Goodwill amortised 11 346 23 552
Provision for impairment of loan
(net of tax) 54 600 -
Headline earnings 212 146 171 666 23.6
Headline earnings per share (cents)
Undiluted 70.3 58.6 20.0
Diluted 66.9 54.9 21.9
Earnings per share (cents)
Undiluted 48.4 50.5 -4.1
Diluted 46.1 47.3 -2.6
Distribution per share (cents)
Interim 9.9 8.6 15.1
Final 14.1 11.2 25.9
Total 24.0 19.8 21.2
Notes:
1. Provision for impairment of loan - refer to Healthcare update.
2. In accordance with new accounting standards the following accounting policies
have been changed during the period under review:
a. Post-retirement medical aid benefits - in accordance with accounting standard
AC116, actuarial gains and losses are reflected in the income statement during
the period in which they arise.
b. Depreciation of investment properties - in accordance with accounting
standard AC123, following the introduction of AC135, depreciation is now
provided on owner-occupied property.
The comparative figures have been restated to reflect these changes and the
effect on the operating profit is reflected below.
2002 2001 Percentage
R`000 R`000 change
Operating profit before the new
accounting standards 323 064 268 472 20.3
AC116 adjustment 1 336 2 690
AC123 adjustment 3 168 3 168
Operating profit as per income statement 318 560 262 614 21.3
The impact of these changes on headline earnings is reflected below by restating
the headline earnings per share to what they would have been had the new
accounting standards not been applied.
2002 2001 Percentage
R`000 R`000 change
Headline earnings per share (cents)
Undiluted 71.7 60.3 18.9
Diluted 68.2 56.5 20.7
3. Distributions and the related STC charges are now accounted for in the period
when the distribution is declared. The statement of changes in equity and
relevant comparative figures have been restated accordingly.
4. This profit statement has been prepared in accordance with the South African
Statements of Generally Accepted Accounting Practice and the accounting policies
are consistent with the prior year other than the changes reflected in notes 2
and 3 above.
Consolidated balance sheet
2002 2001
R`000 R`000
ASSETS
Non-current assets
Fixed assets 617 767 536 111
Goodwill 182 502 78 773
Loans 331 755 295 256
Deferred tax 63 110 44 751
1 195 134 954 891
Current assets 1 266 656 1 025 800
Inventories 1 055 137 897 348
Accounts receivable 196 624 107 270
Tax prepaid 14 895 2 355
Bank balances and cash - 18 827
Total assets 2 461 790 1 980 691
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` interest 1 221 757 1 015 533
Non-current liabilities
Interest-bearing liabilities 230 546 242 398
1 452 303 1 257 931
Current liabilities 1 009 487 722 760
Accounts payable 887 542 677 198
Short-term borrowings 108 583 34 333
Tax 13 362 11 229
Total equity and liabilities 2 461 790 1 980 691
Consolidated cash flow statement
2002 2001
R`000 R`000
Net cash flow from operations 418 834 341 188
Movement in working capital (10 705) (77 272)
Finance costs (21 695) (19 997)
Tax paid (89 507) (98 582)
Cash flow from operating activities 296 927 145 337
Dividends paid (37 737) (23 752)
Net cash effects of operating activities 259 190 121 585
Net cash flow utilised in investing
activities (355 529) (355 023)
(96 339) (233 438)
Net cash effects of financing activities 717 63 285
Change in net cash resources (95 622) (170 153)
Geographical split
The geographical split of turnover and operating profit is as follows:
2002 2001 Percentage
R`000 R`000 change
Turnover
Clicks 2 692 620 2 333 644 15.4
Discom 720 895 642 848 12.1
Music division 439 333 351 840 24.9
The Body Shop 27 161 - -
Link Investment Trust 16 175 - -
Southern African operations 3 896 184 3 328 332 17.1
Priceline 1 574 694 1 030 894 52.8
House 16 913 5 977 183.0
Australian operations 1 591 607 1 036 871 53.5
Total 5 487 791 4 365 203 25.7
Operating profit before interest and tax
Clicks 262 192 211 957 23.7
Discom (17 193) 8 133 -311.4
Music division 22 705 11 124 104.1
The Body Shop 3 446 - -
Link Investment Trust (2 801) - -
Intercare (1 764) - -
Southern African operations 266 585 231 214 15.3
Priceline 44 690 27 042 65.3
House 7 285 4 358 67.2
Australian operations 51 975 31 400 65.5
Total 318 560 262 614 21.3
The rand, relative to the Australian dollar, depreciated significantly during
the year under review. The rates of exchange applied are reflected below (rands
to the Australian dollar).
2002 2001
Income statement items - average rate for
the period 5.54883 4.11854
Balance sheet items - rate at 31 August 5.82403 4.43616
The impact of the exchange rate movement on the group`s performance is reflected
below by restating the turnover and operating profits for the Australian
operations for the current year at the rate applied for the year ended 31 August
2001.
2002 2001 Percentage
R`000 R`000 change
Turnover
Southern Africa 3 896 184 3 328 332 17.1
Australia 1 181 348 1 036 871 13.9
5 077 532 4 365 203 16.3
Operating profit before interest and tax
Southern Africa 266 585 231 214 15.3
Australia 38 578 31 400 22.9
305 163 262 614 16.2
Supplementary information
2002 2001
Ordinary shares in issue (`000) 305 172 298 541
Weighted average number of shares in issue
(`000) 301 772 293 165
Weighted average diluted number of shares
in issue (`000) 317 272 312 916
Net asset value per share (cents) 400 340
Net tangible asset value per share
(cents) 341 314
Depreciation (R`000) 96 426 75 332
Capital expenditure (R`000) 158 005 109 669
Capital commitments (R`000) 225 011 194 981
Changes in equity
2002 2001
R`000 R`000
Increase in share capital and premium 39 952 52 579
Increase in non-distributable reserve 83 611 24 289
Net profit for the period 146 200 148 114
Distribution to shareholders (63 539) (55 531)
Net increase in shareholders` funds 206 224 169 451
Opening shareholders` interest 1 015 533 827 555
Prior year adjustment - (3 973)
1 221 757 993 033
Sale of trademarks previously
written-off - 22 500
Closing shareholders` interest 1 221 757 1 015 533
COMMENTARY
Review by the independent auditor
The financial information has been reviewed by KPMG Inc. whose unqualified
review opinion is available for inspection at the company`s registered office.
It is anticipated that an unqualified audit opinion will be issued in due course
once the detailed annual financial statements have been finalised.
Review of trading
We are pleased to report the group results for the year to August 2002. Group
sales are up 25.7% and operating profit before interest and tax is up 21.3%.
These results reflect intense focus on our group strategies, aimed at aggressive
growth and supply chain management.
Growth has been achieved both organically and through acquisitions and the
number of stores, including both company-owned stores and franchised stores, has
increased from 1 077 at August 2001 to 1 215 stores at August 2002. Franchising
is an important element of our future growth strategy as we position ourselves
increasingly as a provider of goods and services to multi-brand store formats in
a variety of ownership models.
Significant, one-off costs, amounting to R9.1 million were incurred in the
repositioning of the Discom brand. In the year ahead the repositioning of the
brand will be completed and it is expected to return to its previous levels of
profitability A major achievement of the year under review was improved
management of stock and working capital. The benefits of the group`s supply
chain strategies are beginning to be realised, with stocks in South Africa
having been reduced by over R70 million in the six months to August 2002.
Acquisitions
Price Attack
In July 2002 the group acquired Price Attack, a 94-store Australian franchise
business of speciality haircare stores with salons. The cost of this
acquisition was R89 million. R65 million of this amount was paid on the
acquisition date in cash from South Africa and the balance is payable, based on
performance, at set future dates.
The brand has considerable growth potential both inside and outside of Australia
and will leverage off the New Clicks Australia infrastructure.
New United Pharmaceutical Distributors (UPD)
In July 2002, the group concluded an agreement to acquire UPD for an amount of
R281 million, subject to approval from the Competition Commission. This approval
is expected by November. The acquisition has significant implications in terms
of the strategic positioning of New Clicks in the South African healthcare
industry. The aim is to help restore margin to retail pharmacy through enhanced
productivity and efficiency in the supply chain.
Healthcare update
In terms of the group`s healthcare strategies the group has formed an
association with a pharmacy chain, Purchase Milton & Associates (PM & A)
providing funding and services to this company. By virtue of the arrangements
with PM & A New Clicks is entitled to acquire all or certain of its pharmacies,
subject to certain conditions, when the law relating to pharmacy ownership
changes to allow for this.
The loan at the year end amounted to R277 million (2001: R239 million) after the
impairment referred to below.
During the year under review interest amounting to R45.5 million (2001: R10.1
million) was charged to PM & A in respect of the funding provided. In addition
the group also charged R11,4 million (2001: R4 million) in respect of costs
incurred on behalf of PM & A.
PM & A has incurred losses in this, the integration and consolidation phase of
its business.
As a result the directors have decided to subordinate and impair an amount of
R78 million of the loan to PM & A.
Despite this conservative approach, the directors are confident that the full
amount of the loan will be recovered in the future and the company is fully
committed to its journey into healthcare.
Brand overview
Clicks
Total sales for the brand increased by 15.4%, while the sales growth for
existing stores was 8.2%.
The existing stores sales growth for the second half year was 11.3%.
The ClubCard base continues to grow and advanced data mining techniques are
being used to exploit the base and enhance sales.
A strong store development programme is in place for the 2002/03 year. 24 new
stores will be opened and a significant number of older stores renovated.
Number of stores
Company-owned 248
Franchised 13
Contribution to group sales 49.1%
Contribution to group operating profit 82.3%
Discom
The rebranding and repositioning of the Discom stores commenced in the year
under review with the first of the new-look stores having opened in November
2001.
Total sales for the brand increased by 12.1%, while the sales growth for
existing stores was 10.9%. The existing stores sales growth for the second half
year was 20.5%.
32 stores were closed during the year and the platform has now been established
for significantly improved performance in the 2002/03 year.
Number of stores
Company-owned 180
Franchised 2
Contribution to group sales 13.1%
Contribution to group operating profit -5.4%
Music Division - Musica and the Compact Disc Wherehouse
The Music division produced exceptional performance for the year with all stores
sales growth of 24.9% and operating profit growth in excess of 100%. The
existing stores sales growth for the year was 12.0%. The success of the Compact
Disc Wherehouse large-store format will see two new stores opening during the
2002/03 year.
Number of stores
Company-owned 135
Contribution to group sales 8.0%
Contribution to group operating profit 7.1%
The Body Shop
The first Body Shop in South Africa opened in Cavendish Square, Cape Town in
October 2001 and a further 10 stores had been opened by the end of August. These
stores have been well accepted by consumers and are trading ahead of initial
expectations.
During the 2002/03 year an additional nine stores will be opened.
Number of stores
Company-owned 11
Contribution to group sales 0.5%
Contribution to group operating profit 1.1%
The Link Investment Trust (LIT)
The group owns 56% of this trust which holds the franchise for the Link pharmacy
group. During the year under review there has been a high level of activity as
the capabilities and capacity to provide value to the franchisees has been
enhanced. Huge effort has gone into positioning the Link brand as the pre-
eminent healthcare brand and the aggressive marketing of the brand has added
value to the franchisees.
Number of stores
Franchised 324
Intercare
The first Intercare facility opened in Lynnwood, Pretoria at the end of May
2002. This venture, in which the group has an 80% holding, enables a
comprehensive range of healthcare services to be provided under one roof and
additional Intercare centres will be opened during the 2002/03 year. The loss
reflected for the year was as a result of costs incurred in the start-up phase.
Priceline
Priceline achieved an all store sales increase of 13.4% and an existing store
sales increase of 6.5% in a low, 2%, inflation environment. Nine new stores were
opened during the year and the success of the ClubCard in Victoria led to the
national launch in May 2002. The ClubCard, which already has in excess of 800
000 members, is expected to contribute significantly to turnover growth in
2002/03.
The brand has been positioned for the integration of pharmacy and costs have
been incurred in building the infrastructure for new store activity. During the
2002/03 year 16 Priceline and 14 franchised Priceline Pharmacies are planned to
open.
Number of stores
Company-owned 126
Contribution to group sales 28.7%
Contribution to group operating profit 14.0%
House
House is Australia`s largest and most successful dedicated kitchenware and
giftware retail brand.
The results for House are for the first time, for a full twelve months. Ten new
franchised stores were opened during the year and the two, previously company-
owned stores, were franchised during the year.
Private label and direct importation programmes have added to the
differentiation of the brand.
12 new stores will open during the 2002/03 year.
Number of stores
Franchised 80
Contribution to group sales 0.3%
Contribution to group operating profit 2.3%
Price Attack
Acquired effective from 3 July 2002, the franchise income for the two months
amounted to over R2.5 million but was offset by non-recurring management and
legal costs incurred to develop a compelling franchise model.
Number of stores
Franchised 95
Prospects
Assuming that there will not be a significant worsening of economic conditions
the group is optimistic that a strong performance will be achieved in the
2002/03 year. The benefits of key strategies are being realised, a turnaround
in the Discom performance is expected and the ongoing growth capabilities of the
brands will enhance performance. Additionally, in Australia, the launch of the
Priceline Pharmacy and the inclusion of Price Attack for a full year will
benefit the group.
Capitalisation share award
The Board has resolved to award capitalisation shares to ordinary shareholders
recorded in the share register of the company at the close of business on
Friday, 6 December 2002 ("the record date"). The rounded number of
capitalisation shares to which a shareholder will be entitled in terms of the
capitalisation award will be determined by multiplying the number of ordinary
shares held by the shareholder by a ratio. This ratio will be determined by
multiplying 14,1 cents per share by 1,05 and dividing the result by the weighted
average trading price of the ordinary shares of the company on the JSE
Securities Exchange South Africa ("the JSE") for the three days ending
Wednesday, 20 November 2002 ("the issue price"). The last day to trade New
Clicks shares on the JSE "cum" the capitalisation award to ensure a purchaser
appears as the owner on the record date, will be Friday, 29 November 2002.
Shareholders will be given the opportunity to decline the award of
capitalisation shares in respect of all or part of their shareholding and
instead may elect to receive a cash dividend of 14,1 cents per share ("the cash
election"). Documentation in respect of the capitalisation award and the cash
election will be posted to shareholders on or about Wednesday, 6 November 2002.
In order to be valid, completed forms of election for certificated shareholders
wishing to receive the cash election will need to be received by the company`s
transfer secretaries by no later than 12:00 on Friday, 6 December 2002. In the
case of dematerialised securities, shareholders must inform their duly appointed
Central Securities Depository Participants ("CSDP") or brokers in the manner and
time stipulated in the agreement between the shareholder and the CSDP or broker,
as to their election. Application will be made to the JSE for the maximum number
of capitalisation shares to be listed with effect from the commencement of
business on Monday, 2 December 2002 when the price of the company`s securities
will be quoted "ex" the capitalisation award. Cheques and share certificates
(where required) in respect of new ordinary shares will be posted to
shareholders on Monday, 9 December 2002. Shareholders` accounts in respect of
dematerialised securities will be credited by their CSDPs or brokers on Monday,
9 December 2002. Share certificates may not be dematerialised or rematerialised
between Monday, 2 December 2002 and Friday, 6 December 2002, both days
inclusive.
By order of the Board
Allan Scott
Company Secretary
14 October 2002
Registered address
Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Transfer secretaries
Computershare Investor Services Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Directors
DM Nurek*, TC Honneysett, RB Godfrey, PWG. Green, E Osrin*, JC Sher
(Australian), PEI Swartz*, A Zimbler* * non-executive
This information is available on the New Clicks Internet site:
http://www.newclicks.co.za
Sponsor
Investec Securities
Member of the JSE
(Registration number 1972/008905/06)
Date: 14/10/2002 12:00:00 PM Produced by the JSE SENS Department
