| Mon 14 Apr 2003, 9:16 | | Clicks awaits pharmacy law change |
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Consumer Industries Editor
CAPE TOWN Health, home and beauty retailer New Clicks Holdings was poised to embark on a growth strategy if the expected changes to legislation to allow nonpharmacists to own pharmacies were passed, it said on Friday.
The group's healthcare interests include 56% in Link Investment Trust, which has 250 Link stores, an association with Purchase Milton & Associates, which has 76 Link and Linkmax stores, and 100% of United Pharmaceutical Distributors, acquired in the past year.
New Clicks group leader Trevor Honneysett said the group has suspensive sale agreements that would enable it to acquire Purchase Milton & Associates if legislation allowed, and the loans and provisions in Purchase Milton & Associates could be written off against goodwill on acquisition.
New Clicks would expect to maintain its existing stake in Link Investment Trust, which is a franchisor, and the franchised Link stores would remain independent.
When the legislative process is complete and New Clicks has had time to consider it, it will make a statement to the market about its plans.
Honneysett did not expect that the second leg of healthcare legislation, which will affect pricing of pharmaceutical products, would affect future profitability in retailing drugs.
The details of the process would not be publicised for about a year, but it was likely it would focus on maximum rather than minimum prices.
The group reported that turnover for the six months to February rose 23% to R3,4bn compared with the same period last year while operating profits were 21% higher at R214,6m.
Excluding the effects of the acquisition of United Pharmaceutical Distributors and Price Attack in Australia, turnover rose 11% and operating profit 13%.
Honneysett said taking inflation into account, the turnover figure showed no growth owing to the disappointing performance of the Clicks chain.
The group's strategy in the past few years has increasingly been to diversify its brands to reduce its dependence on the performance of Clicks.
Clicks' sales of health and beauty products grew 18% but lifestyle, which includes decorative gifts, kitchenware, stationery and confectionery, grew only 5%.
Headline earnings were 9% higher at 38,5c on which a distribution of 10,9c (9,9c) is proposed. The distribution is in the form of shares or cash.
The balance sheet shows that inventory turnover slowed to 126 days from 123 days and accounts receivable rose almost three times compared to a 1,5 times increase in accounts payable.
But New Clicks financial director Peter Green said the figures were distorted by the inclusion of the pharmaceutical distribution business. A better indicator of improved cash management is the R45m reduction in working capital.
The benefits of the group's investment in a new distribution centre had been slower than originally expected but were now becoming evident.
Besides Clicks, all the group's SA operations showed improvement, with Discom reducing its loss, a satisfactory performance from Musica and the CD Warehouse due to a focus on black and Afrikaans artists, and from The Body Shop, with another 10 stores due to be opened.
Apr 14 2003 07:31:51:000AM Charlotte Mathews Business Day 1st Edition
