| Thu 22 Apr 2004, 9:27 | | Interim Group Results for the six months ended 29 |
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Interim Group Results for the six months ended 29 February 2004
NEW CLICKS HOLDINGS LIMITED
Registration Number 1996/000645/06
Share Code: NCL
ISIN: ZAE000014585
Interim group results
for the six months ended 29 February 2004
Turnover from continuing operations +38%
Operating Profit from continuing operations +34%
Headline Earnings from continuing operations +36%
Diluted Headline EPS from continuing operations +26%
CONSOLIDATED INCOME STATEMENT
6 months to 6 months to Year to
29 February 28 February 31 August
2004 2003 2003
(unaudited) (unaudited) % change (audited)
R"000 R"000 R"000
Continuing operations
Revenue 3 708 406 2 694 233 6 156 569
Turnover 3 523 462 2 545 892 38.4 5 747 958
Cost of merchandise 2 778 345 1 932 166 4 501 107
Gross profit 745 117 613 726 1 246 851
Other revenue 184 944 148 341 408 611
Expenditure 702 554 592 285 1 322 806
Operating profit 227 507 169 782 34.0 332 656
Net interest
(paid)/received (30 978) (29 021) 6.7 (57 450)
Interest paid - normal
operations (30 978) (29 021) (57 450)
Interest accrued -
Purchase Milton
& Associates (PM&A) 24 986 28 835 59 265
Provision against interest
accrued - PM&A (24 986) (28 835) (59 265)
Net profit before
exceptional items 196 529 140 761 39.6 275 206
Exceptional items
Profit on sale of
Intercare 587 - -
Loss on disposal of
property, plant
and equipment (546) - (141)
Goodwill amortised (5 485) (2 097) (7 618)
Profit before taxation 191 085 138 664 267 447
Taxation 58 561 39 413 48.6 68 411
Net profit from continuing
operations 132 524 99 251 33.5 199 036
Discontinued operations
Revenue 725 929 952 288 1 739 431
Operating profit 41 606 44 778 49 347
Net interest paid (5 317) (13 733) (26 667)
Net profit before
exceptional items 36 289 31 045 22 680
Exceptional items
Profit on the sale of
stores - - 26 454
Profit on sale of
Australian operations 4 477 - -
Loss on disposal of
property, plant
and equipment (361) - (2 469)
Goodwill amortised (5 301) (8 422) (16 101)
Profit before taxation 35 104 22 623 30 564
Taxation 11 012 8 693 15 332
Net profit from
discontinued operations 24 092 13 930 15 232
Headline earnings
Total profit attributable
to ordinary
shareholders 156 616 113 181 214 268
Adjustments for
Profit on the sale of
stores - - (18 518)
Profit on sale of
Australian operations (4 477) - -
Profit on sale of
Intercare (587) - -
Loss on disposal of
property, plant
and equipment 635 - 1 827
Goodwill amortised 10 786 10 519 23 719
Headline earnings 162 973 123 700 31.7 221 296
Comprises:
Headline earnings from
continuing operations 137 804 101 348 36.0 206 753
Headline earnings from
discontinued operations 25 169 22 352 14 543
Undiluted headline
earnings per share (cents)
All operations 45.9 38.5 19.2 65.6
Continuing operations 38.8 31.5 23.2 61.2
Diluted headline earnings
per share (cents)
All operations 45.2 37.0 22.2 64.5
Continuing operations 38.2 30.3 26.1 60.3
Undiluted earnings per
share (cents)
All operations 44.1 35.2 25.3 63.5
Continuing operations 37.3 30.9 20.7 59.0
Diluted earnings per
share (cents)
All operations 43.5 33.9 28.3 62.5
Continuing operations 36.8 29.7 23.9 58.0
Distributions per
share (cents)
Proposed/paid - July 12.5 10.9 14.7 10.9
Paid - December 15.1
CONSOLIDATED BALANCE SHEET
As at As at As at
29 February 28 February 31 August
2004 2003 2003
(unaudited) (unaudited) (audited)
R"000 R"000 R"000
Assets
Non-current assets 1 259 991 1 365 727 1 452 501
Property, plant and equipment 636 269 686 980 747 263
Trademarks 6 780 4 905 4 580
Goodwill 106 898 245 924 235 288
Deferred taxation assets 80 998 69 900 81 363
Loans 429 046 358 018 384 007
Current assets 1 918 157 1 755 058 2 001 329
Inventories 1 187 893 1 288 652 1 401 061
Accounts receivable 414 207 466 406 417 305
Taxation prepaid - - 3 754
Cash on hand 316 057 - 179 209
Total assets 3 178 148 3 120 785 3 453 830
Equity and liabilities
Capital and reserves
Ordinary shareholders" interest 1 698 700 1 558 789 1 608 510
Non-current liabilities
Long-term liabilities 374 582 235 037 412 532
Deferred taxation liabilities 27 331 2 488 15 252
Current liabilities 1 077 535 1 324 471 1 417 536
Short-term borrowings 6 944 139 984 33 005
Accounts payable 1 041 803 1 163 406 1 373 743
Taxation payable 28 788 21 081 10 788
Total equity and liabilities 3 178 148 3 120 785 3 453 830
CONSOLIDATED CASH FLOW STATEMENT
6 months to 6 months to Year to
29 February 28 February 31 August
2004 2003 2003
(unaudited) (unaudited) (audited)
R"000 R"000 R"000
Net cash flow from operations 324 345 269 051 513 820
Movement in working capital (215 750) (105 235) 38 893
Net interest paid (36 295) (42 754) (84 117)
Taxation paid (37 719) (35 937) (87 145)
Cash effects of operating activities 34 581 85 125 381 451
Distributions to ordinary shareholders (53 515) (8 596) (44 243)
Net cash effects of operating activities (18 934) 76 529 337 208
Net cash effects of investing activities 180 858 (104 667) (267 501)
Net cash effects of financing activities 5 002 (7 186) 188 949
Net increase/(decrease) in cash and cash
equivalents 166 926 (35 324) 258 656
CONSOLIDATED CHANGES IN EQUITY
6 months to 6 months to Year to
29 February 28 February 31 August
2004 2003 2003
(unaudited) (unaudited) (audited)
R"000 R"000 R"000
Increase in share capital and premium 23 679 336 651 340 187
Decrease in non-distributable reserve (35 689) (69 727) (86 097)
Net profit for the period 156 616 113 181 214 268
Prior period adjustment (901) - -
Distributions to shareholders (53 515) (43 073) (81 605)
Net increase in shareholders" funds 90 190 337 032 386 753
Opening shareholders" interest 1 608 510 1 221 757 1 221 757
Closing shareholders" interest 1 698 700 1 558 789 1 608 510
Percentage increase in closing
shareholders" interest 9.0
SEGMENTAL ANALYSIS
The geographical split and split per brand of turnover and profit is as follows:
6 months to 6 months to
29 February 28 February %
2004 2003 change
R"000 R"000
Turnover
Clicks 1 693 253 1 522 393 11.2
Discom 452 164 391 732 15.4
Music division 284 333 268 041 6.1
The Body Shop 28 433 24 903 14.2
Link Investment Trust 9 870 9 431 4.7
New United Pharmaceutical Distributors 1 055 409 329 392*
Southern African operations 3 523 462 2 545 892 38.4
Australian operations 654 651 890 787**
Total 4 178 113 3 436 679 21.6
Operating profit before interest and tax
Clicks 177 521 138 327 28.3
Discom 2 693 (4 820) 155.9
Music division 10 929 19 999 -45.4
The Body Shop 7 282 5 556 31.1
Link Investment Trust 852 987 -13.7
Intercare (327) (362) 9.7
New United Pharmaceutical Distributors 28 557 10 095*
Southern African operations 227 507 169 782 34.0
Australian operations 41 606 44 778**
Total 269 113 214 560 25.4
* New UPD included for 2 months in 2003
** Australian operations included for 4 months in 2004
SUPPLEMENTARY INFORMATION
29 February 28 February 31 August
2004 2003 2003
Number of ordinary shares in
issue ("000) 359 186 353 468 354 118
Weighted average number of shares
in issue ("000) 355 092 321 246 337 587
Weighted average diluted number
of shares in issue ("000) 360 429 334 075 342 906
Net asset value per share (cents) 473 441 454
Net tangible asset value per
share (cents) 441 371 388
Depreciation and amortisation (R"000) 60 071 52 418 103 726
Capital expenditure (R"000) 91 109 80 998 203 005
Capital commitments (R"000) 124 635 116 966 286 183
NOTES
Accounting policies
These interim 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 2003 annual financial
statements.
Discontinued operations
It was announced on 5 January 2004 that New Clicks Holdings Limited and its
wholly-owned subsidiary New Clicks International Holdings NV ("New Clicks") had
entered into an agreement to dispose of New Clicks" interest in New Clicks
Australia (Proprietary) Limited ("NCA") to Synapse Holdings (Proprietary)
Limited, a company owned by a consortium of private equity funders (the
"consortium"). NCA was a wholly-owned subsidiary of New Clicks and operates in
the Australian retail market, trading under the brand names of Priceline,
Priceline Pharmacy, Price Attack and House.
The sale proceeds were an amount of Australian $107 million. Out of these
proceeds, New Clicks was obliged to retire certain bank debts and financial
lease liabilities as at 28 December 2003, which amounted to Australian $19.7
million; and the consortium and NCA were obliged to redeem redeemable preference
shares held by New Clicks for a redemption consideration of Australian $67.2
million.
New Clicks therefore received sale proceeds from the disposal of Australian
$87.3 million, including the redemption consideration in respect of the
preference shares, and a preference dividend of Australian $1.5 million, which
was declared and paid prior to the completion date of 13 February 2004. This
represents a surplus over the ungeared tangible net assets as at 31 August 2003.
These proceeds were received on 17 February 2004, realising a profit on sale of
R4.5 million.
The results of the NCA operations were incorporated in the New Clicks results
until 31 December 2003, and have been disclosed separately in the income
statement as discontinued operations.
COMMENTARY
Financial performance
New Clicks Holdings is pleased to report an improved financial performance,
highlighted by encouraging signs of a turnaround in its two core brands, Clicks
and Discom.
The group lifted turnover from continuing operations by 38.4% to R3.5 billion in
the six-month period. This performance was enhanced by the inclusion of New
United Pharmaceutical Distributors (UPD), which was acquired by New Clicks with
effect from 1 January 2003, for the full six months as opposed to two months in
the corresponding reporting period. Comparable turnover growth - excluding UPD -
was 11.3%.
The group increased operating profit from continuing operations by 34% from
R169,8 million to R227.5 million. Operating profit excluding UPD rose by 24.6%.
New Clicks announced the sale of its wholly-owned subsidiary, New Clicks
Australia (NCA), to a consortium of private equity funders on 5 January 2004.
The results of NCA have been incorporated in the New Clicks results for the four
months to 31 December 2003, and have been reflected separately in the income
statement as discontinued operations.
In line with generally accepted accounting practice, the group has disclosed the
financial performance from continuing operations to provide shareholders with a
more meaningful basis of comparison for evaluating the performance of the
business.
Headline earnings from continuing operations were 36% higher at R137,8 million,
while diluted headline earnings per share from continuing operations rose by
26.1% to 38.2 cents per share.
Stock levels in South Africa at the interim stage were 17% up on the
corresponding period in 2003, with the stock turn in the retail divisions
decreasing from 5.1 to 4.7 times.
Expenses, excluding UPD, increased by 8.6%.
Trading performance
The group"s flagship brand Clicks increased turnover by 11.2%, with the
lifestyle category reflecting a turnaround as a result of a significantly
improved homewares range. The health and beauty categories continued to show
strong real growth. The change in the merchandise mix lifted the brand"s margin,
which was a contributing factor in the 28.3% increase in operating profit.
Discom showed a 15,4% increase in turnover and made a long-awaited return to
profitability. The brand turned a loss of R4.8 million in 2003 into a profit of
R2.7 million. Discom recorded strong growth in fast moving consumer goods (FMCG)
merchandise while reversing a five-year downward trend in the sale of lifestyle
merchandise.
Despite a 6.1% increase in turnover, the Music Division showed a R9 million
decline in profit as the global slowdown in high margin CD sales affected the
business. The division"s repositioning into broader entertainment merchandise is
having a positive effect, with sales of gaming, DVDs and lifestyle products
growing from 8.3% to 16.5% of sales. The strategy of moving into entertainment
is expected to restore the performance of the division in the longer term.
The Body Shop showed a 31.1% increase in profit from its 21 stores nationally,
and continues to show an improvement in cost control and stock turns.
UPD posted an operating profit of R28,6 million, which is 11.5% up on the
corresponding period in the previous year. The wholesale distributor continues
to show growth in turnover from independent pharmacies and the PM&A group, and
to contain its costs.
Pharmacy progress
While the group"s pharmacy implementation plans were further frustrated by
delays in the approval of the transfer of licences from the Purchase Milton &
Associates (PM&A) group to Clicks, the initial 33 licences were approved in
early March. The first five Clicks Pharmacies have been opened, with a further
four planned to be opened in June/July. The performance of these stores in the
first six weeks of trading has been encouraging.
The performance of the PM&A group, which will be consolidated into New Clicks
with effect from 1 March 2004, is still disappointing. The delay in integrating
the chain into Clicks has been the prime reason for this performance.
The value of the investment in PM&A will be reviewed in the second half of the
year once there is certainty around single exit pricing.
As a result of the changes in pharmacy ownership legislation, New Clicks has
sold its stake in Intercare to the other shareholders. The impact of this
transaction is not material.
Prospects
New Clicks aims to show a consistent improvement in performance which will
translate into improved returns to shareholders. The focus in the second half of
the financial year will be on the integration of pharmacy into Clicks, the
continued focus on the lifestyle category, the ongoing turnaround in Discom and
improving the performance of the music business. Management is also committed to
improving stock management, expense control and the completion of the
implementation of the new financial systems.
The outcome of the proposed single exit pricing legislation is likely to impact
the group"s healthcare interests, but the board is confident that the group"s
business model of developing an integrated channel to market for pharmacy will
be sustainable in the long term.
Dividend declaration
The board of directors has declared an interim cash dividend of 12.5 cents per
share payable on Monday, 5 July 2004 to shareholders recorded in the register of
the company at the close of business on Friday, 2 July 2004. The last day to
trade ("cum" the dividend) in order to participate in the dividend will be
Friday, 25 June 2004 and the shares will trade "ex dividend" from the
commencement of business on Monday, 28 June 2004. The record date will be
Friday, 2 July 2004.
Share certificates may not be dematerialised or rematerialised between Monday,
28 June 2004 and Friday, 2 July 2004, both dates inclusive.
By order of the Board
ALLAN SCOTT
Company Secretary
21 April 2004
Registered address:
Cnr Searle and Pontac Streets, Cape Town 8001, PO Box 5142, Cape Town 8000
Directors:
D.M. Nurek*, T.C. Honneysett, R.B. Godfrey, E. Osrin*, L.A. Swartz*,
P.E.I. Swartz*, A. Zimbler* * non-executive
Transfer Secretaries:
Computershare 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 New Clicks
Holdings website: http://www.newclicks.co.za
Registration Number 1996/000645/06
Share Code: NCL
ISIN: ZAE000014585
