| Thu 16 Oct 2003, 10:47 | | NuClicks results for the year ended 31 Aug 03 |
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New Clicks Holdings Limited - Reviewed Group Results For The Year Ended 31
Release Date: 16/10/2003 08:00:05 Code(s): NCL
New Clicks Holdings Limited - Reviewed Group results for the year ended 31
August 2003
NEW CLICKS HOLDINGS LIMITED
Registration Number 1996/000645/06
Share Code: NCL ISIN: ZAE000014585
REVIEWED GROUP RESULTS FOR THE YEAR ENDED 31 AUGUST 2003
* Turnover +34.3%
* Operating Profit +19.9%
* Diluted Headline EPS +29.8%
CONSOLIDATED INCOME STATEMENT
Year ended Year ended
31 August 31 August
2003 2002
R"000 R"000 % change
Turnover 7 367 739 5 487 791 34.3
Cost of merchandise 5 576 857 3 932 390
Gross profit 1 790 882 1 555 401 15.1
Other revenue 528 261 424 861
Expenditure 1 937 140 1 661 702 16.6
Operating profit 382 003 318 560 19.9
Net interest paid (84 117) (67 220) 25.1
Interest paid - excluding PM&A (84 117) (67 220)
Interest accrued - PM&A 59 265 45 525
Provision - PM&A interest (59 265) (45 525)
Net profit after interest 297 886 251 340 18.5
Provision for impairment of loan - (32 475)
Net profit before exceptional items 297 886 218 865 36.1
Exceptional items
Profit on the sale of stores 26 454 -
Goodwill amortised (23 719) (11 346)
Loss on disposal of fixed assets (2 610) -
Net profit before taxation 298 011 207 519
Taxation 83 743 61 319 36.6
Profit attributable to ordinary
shareholders 214 268 146 200 46.6
Adjustments for
Profit on the sale of stores (18 518) -
Goodwill amortised 23 719 11 346
Loss on disposal of fixed assets 1 827 -
Headline earnings 221 296 157 546 40.5
Headline earnings per share (cents)
Undiluted 65.6 52.2 25.7
Diluted 64.5 49.7 29.8
Earnings per share (cents)
Undiluted 63.5 48.4 31.2
Diluted 62.5 46.1 35.6
Distribution per share (cents)
Paid - December 14.1 11.2 25.9
Paid - July 10.9 9.9 10.1
Proposed - December 15.1
NOTES
Accounting policies and restatement of comparatives
These financial statements have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice, and the accounting
policies used are consistent with those applicable for the 2002 annual financial
statements, other than the changes reflected in the notes below.
1. Loan to Purchase Milton & Associates (PM&A)
PM&A, the pharmacy chain that the group is in the process of acquiring, has
an estimated shareholders" deficit of R176.1 million as at 31 August 2003. The
net loan to PM&A from the group amounted to R295 million at the end of August
2003, after the impairment disclosed at August 2002 and the interest provision
explained in note 2 below. After trading at a loss of R8 million in the six
months to February 2003, PM&A recorded a trading profit of R8 million in the
second half of the year to break even for the year, before the interest charge
from the group. The directors are of the opinion that no further impairment of
the loan is required on the basis of a value in use calculation.
2. Net interest
As PM&A traded at a break even level for the year, the directors have decided
to provide in full for the interest accrued on the loan to PM&A.
The comparatives for the year to August 2002 have been restated to achieve
consistency, with part of the R78 million impairment being allocated as a
provision against interest accrued, and the balance remaining as an impairment.
The effect of this on headline earnings is included in note 3 below.
3. Accounting circular on headline earnings
In line with the new definition of headline earnings, any impairment in
respect of the loan to PM&A must be taken into account in headline earnings. The
comparative figures for the year to August 2002 have been restated in line with
this. The effect of this change for the year to August 2002 is to reduce
headline earnings by R54.6 million and to reduce diluted headline earnings per
share by 17.2 cents.
4. AC133 - Financial instruments: recognition and measurement
The group has adopted this statement with effect from 1 September 2002. There
has been no need to adjust opening reserves, and there is no significant impact
on profit in the current year.
These results have been reviewed by KPMG Inc. Chartered Accountants (SA), the
auditors of New Clicks Holdings Limited, and their unqualified review opinion is
available for inspection at New Clicks Holdings" registered office.
CONSOLIDATED BALANCE SHEET
As at As at
31 August 31 August
2003 2002
R"000 R"000
ASSETS
Non-current assets 1 432 719 1 195 134
Property, plant and equipment 751 843 617 767
Goodwill 235 288 182 502
Loans 384 007 331 755
Deferred taxation 61 581 63 110
Current assets 1 997 575 1 266 656
Inventories 1 401 061 1 055 137
Accounts receivable 417 305 196 624
Cash on hand 179 209 -
Taxation prepaid - 14 895
Total assets 3 430 294 2 461 790
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" interest 1 608 510 1 221 757
Non-current liabilities
Interest-bearing liabilities 412 532 230 546
Current liabilities 1 409 252 1 009 487
Accounts payable 1 373 743 887 542
Short-term borrowings 33 005 108 583
Taxation payable 2 504 13 362
Total equity and liabilities 3 430 294 2 461 790
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 August 31 August
2003 2002
R"000 R"000
Net cash flow from operations 513 821 418 834
Movement in working capital 38 894 (10 705)
Net interest paid (84 117) (67 220)
Taxation paid (87 145) (89 508)
Cash effects of operating activities 381 453 251 401
Distributions to ordinary shareholders (44 244) (37 736)
Net cash effects of operating activities 337 209 213 665
Net cash flow utilised in investing activities (258 782) (310 034)
Net cash effects of financing activities 180 230 717
Net increase/(decrease) in cash and cash equivalents 258 657 (95 652)
CONSOLIDATED CHANGES IN EQUITY
Year ended Year ended
31 August 31 August
2003 2002
R"000 R"000
Increase in share capital and premium 340 187 39 952
(Decrease)/increase in non-distributable reserve (86 097) 83 611
Net profit for the year 214 268 146 200
Distributions to shareholders (81 605) (63 539)
Net increase in shareholders" funds 386 753 206 224
Opening shareholders" interest 1 221 757 1 015 533
Closing shareholders" interest 1 608 510 1 221 757
Percentage increase in closing shareholders" interest 31.7
SEGMENTAL ANALYSIS
The geographical split and split per brand of turnover and profit is as follows:
Year ended Year ended
31 August 31 August
2003 2002 %
R"000 R"000 change
Turnover
Clicks 2 997 226 2 692 620 11.3
Discom 771 441 720 895 7.0
Music division 482 287 439 333 9.8
The Body Shop 45 781 27 161 68.6
Link Investment Trust 19 919 16 175 23.1
United Pharmaceutical Distributors 1 431 304 -
Southern African operations 5 747 958 3 896 184 47.5
Priceline 1 587 711 1 574 694 0.8
Priceline Pharmacy 17 705 -
House 10 347 16 913 -38.8
Price Attack 4 018 -
Australian operations 1 619 781 1 591 607 1.8
Total 7 367 739 5 487 791 34.3
Operating profit before interest and tax
Clicks 259 281 262 974 -1.4
Discom (5 571) (20 637)
Music division 25 675 21 470 19.6
The Body Shop 10 017 5 176 93.5
Link Investment Trust (2 712) (2 801)
Intercare (962) (1 764)
United Pharmaceutical Distributors 54 304 -
Shared Services unallocated (7 376) 2 167
Southern African operations 332 656 266 585 24.8
Priceline 124 974 121 758 2.6
Priceline Pharmacy (2 029) -
House 11 548 12 768 -9.6
Price Attack 17 999 (94)
Shared Services (103 145) (82 457)
Australian operations 49 347 51 975 -5.1
Total 382 003 318 560 19.9
NOTE: The Australian shared services costs have not been allocated to the
trading brands as these costs have been stepped up ahead of the planned growth
to support the development of the franchise business model.
IMPACT OF FOREIGN CURRENCY FLUCTUATIONS
The rates of exchange applied in the conversion of the Australian dollar to the
rand are reflected below (rands to the Australian dollar).
2003 2002
Income statement items - average rate
for the year to 31 August 5.11686 5.54883
Balance sheet items - rate at 31 August 4.72438 5.82403
The impact of the exchange rate movement on the group"s performance is reflected
below by restating the turnover and operating profit for the Australian
operations for the current year at the rate applied for the year ended 31 August
2002.
Year ended Year ended
31 August 31 August
2003 2002 %
R"000 R"000 change
Turnover
Southern Africa 5 747 958 3 896 184 47.5
Australia 1 756 524 1 591 607 10.4
7 504 482 5 487 791 36.7
Operating profit before interest and tax
Southern Africa 332 656 266 585 24.8
Australia 53 513 51 975 3.0
386 169 318 560 21.2
SUPPLEMENTARY INFORMATION
Year ended Year ended
31 August 31 August
2003 2002
Number of ordinary shares in issue ("000) 354 118 305 172
Weighted average number of shares in
issue ("000) 337 587 301 772
Weighted average diluted number of shares
in issue ("000) 342 906 317 272
Net asset value per share (cents) 454 400
Net tangible asset value per share(cents) 388 341
Depreciation (R"000) 103 726 96 425
Capital expenditure (R"000) 203 006 158 005
Capital commitments (R"000) 226 966 225 011
COMMENTARY
Group results
New Clicks Holdings increased turnover by 34% to R7.4 billion for the
financial year, a performance which was bolstered by the acquisition of New
United Pharmaceutical Distributors (UPD) during the year. Comparable turnover
growth was a more modest 8.2% and this was negatively impacted by declining
sales in the lifestyle merchandise category in South Africa and the effect of
the strengthening Rand on the results of New Clicks Australia.
The group lifted operating profit by 20% from R319 million to R382 million.
Headline earnings per share grew 26% to 65.6 cents per share, while diluted
headline earnings per share showed a 30% rise to 64.5 cents per share. The
increase is largely due to an impairment of R32.5 million of the loan to
pharmacy group Purchase Milton & Associates (PM&A) which was reflected in the
2002 figures. No further impairment was considered necessary in 2003. Diluted
headline earnings per share adjusted for the PM&A provision increased by 13.4%.
The 10.3% decline in the group"s operating margin from 5.8% to 5.2% can be
attributed to the lower margin profile within UPD"s business and the change in
product mix as a result of the disappointing lifestyle sales.
Interest paid by the group rose by 25.1% owing to the higher average interest
rates during the period, the financing costs for the purchase of Price Attack in
Australia and the increased inventory levels.
Year-end stock levels, excluding UPD, were 16% higher than last year, mainly
as a result of the stocks required for the promotional strategy being pursued by
the Clicks and Discom brands, the increased volumes of imports and the earlier
landing of these stocks, as well as the growth in the number of Body Shop
stores.
Trading review
A strategic decision has been taken by the board of New Clicks Holdings to
operate the South African and Australian divisions on an autonomous basis.
Management structures spanning the two regions have been dismantled and the
respective leadership teams have been given responsibility for their own
strategic planning and implementation. Cost savings are expected to flow from
the separation of the two geographic divisions.
New Clicks South Africa and New Clicks Australia will continue to have a
working relationship and share knowledge and information at a high level.
New Clicks South Africa
The changes in legislation allowing for corporate ownership of pharmacies has
enabled the group to translate its healthcare vision into reality and move
towards introducing dispensaries into Clicks stores.
Allied to this was the approval granted by the Competition Tribunal for New
Clicks to acquire PM&A, which operates 80 pharmacies around the country. It is
encouraging that PM&A has started to show an improved operating performance,
posting a profit before interest and goodwill write-off for the second half of
the year.
The performance of the core Clicks brand was impacted by the disappointing
lifestyle turnover, and despite strong real growth in both the beauty and health
merchandise categories, turnover growth was restricted to 11.3%.
The new leadership team has taken strong remedial action to arrest the
decline in homewares by anticipating customer needs and focusing on the
presentation of merchandise in its promotional campaigns. Early indications are
that the recently introduced homewares range is meeting customers" expectations
for both value and quality.
Discom continues its turnaround and despite not yet returning to
profitability, reduced its operating loss from R20.6 million to R5.6 million.
Discom has shown strong growth in its African beauty and hair care products but
has been hampered by a slowdown in homeware sales. The youthful image and upbeat
brand positioning of Look Good, Feel Good is finding increasing favour with
emerging market consumers.
The benefits of the acquisition of UPD are already starting to emerge, with
the division contributing R54.3 million for the eight months it has been in the
group. This profit is slightly ahead of initial expectations and is a positive
reinforcement of management"s confidence in the future of the division. With its
inclusion in the group, UPD is able to negotiate more favourable prices from
manufacturers and these are already being passed on to PM&A and Link pharmacies,
as well as other independent customers.
The music division increased profit by 19.6%, despite tough trading
conditions and a general slowdown in sales in the music industry. The Body Shop,
while coming off a low base, increased its stores during the year and showed a
93.5% growth in profit.
New Clicks Australia
New Clicks Australia (NCA) experienced a difficult trading period and its
contribution to the group"s headline earnings declined in Rand terms.
During the year NCA implemented its pharmacy strategy. The model adopted in
Australia enables pharmacists to continue owning and managing the pharmacy,
while NCA provides `front shop" expertise and services. This provides
pharmacists with a more sustainable business with higher margin and increased
turnover. Seven pharmacies were opened and further stores are planned for the
new financial year.
NCA has developed a strategy to convert selected stores to pharmacy and sell
the businesses to franchise holders. The sale of two Priceline stores during the
reporting period realised A$5.2 million (R26.5 million) and the stores will in
future generate franchise fees for NCA.
Price Attack, which was acquired in July 2002, was successfully integrated into
NCA.
A new management structure was implemented to enable NCA to operate as an
independent business. Brand leadership was also strengthened, with new leaders
being appointed for Priceline and Price Attack, while a new brand team was
assembled for House.
Prospects
The first Clicks Pharmacy will be opened in November, with a substantial
number of pharmacies planned for the forthcoming year. Pharmacy dispensaries
will allow Clicks to offer an essential commodity to customers for the first
time and ensure that a higher volume of sales will be generated through an
existing infrastructure. The pharmacy offering, together with an improved
lifestyle merchandise range, will lead to the emergence of Clicks as the pre-
eminent healthcare brand.
Discom is expected to return to profitability this year as the benefits of
its restructuring and repositioning become evident.
Management is committed to a substantially increased focus on performance
delivery, as well as delivery on a number of strategic objectives across the
group.
Based on the forecast performance for the group, the directors are confident
that shareholders can expect continued real growth in earnings in the year
ahead.
DIVIDEND DECLARATION
The board of directors has declared a final cash dividend of 15.1 cents per
share payable on Monday, 8 December 2003 to shareholders recorded in the
register of the company at the close of business on Friday, 5 December 2003. The
last day to trade ("cum" the dividend) in order to participate in the dividend
will be Friday, 28 November 2003 and the shares will trade "ex dividend" from
the commencement of business on Monday, 1 December 2003. The record date will be
Friday, 5 December 2003.
Share certificates may not be dematerialised or rematerialised between
Monday, 1 December 2003 and Friday, 5 December 2003, both dates inclusive.
By order of the Board
ALLAN SCOTT
Company Secretary
15 October 2003
Registered address:
Cnr Searle and Pontac Streets
Cape Town 8001, PO Box 5142
Cape Town 8000
Directors:
D.M. Nurek (chairman)*, T.C. Honneysett, R.B. Godfrey, E. Osrin*,
J.C. Sher (Australian), P.E.I. Swartz (deputy chairman)*, A. Zimbler*
* non-executive
Transfer Secretaries:
Computershare Limited
70 Marshall Street
Marshalltown
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Sponsor: Investec Securities Limited
This information, together with the presentation to analysts, is available
on the New Clicks Holdings website: http://www.newclicks.co.za
Date: 16/10/2003 08:00:15 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
