| Thu 21 Oct 2004, 9:31 | | RESULTS FOR THE YEAR ENDED 31 AUGUST 2004 |
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NEW CLICKS - REVIEWED GROUP RESULTS FOR THE YEAR ENDED 31 AUGUST 2004
NEW CLICKS HOLDINGS LIMITED
(Registration Number: 1996/000645/06)
Share Code: NCL
ISIN: ZAE000014585
Reviewed Group Results for the year ended 31 August 2004
* Turnover
* from continuing operations +28.6%
* Headline Earnings
* from continuing operations +19.4%
* Diluted Headline EPS
* from continuing operations +12.7%
* Distributions per share +34.6%
Condensed Consolidated Income Statement
Year to Year to
31 August 31 August
2004 2003 %
(reviewed) (audited) change
R`000 R`000
Continuing operations
Revenue 7 856 534 6 149 101 27.8
Turnover 7 394 151 5 747 958 28.6
Cost of merchandise 5 856 542 4 535 799 29.1
Gross profit 1 537 609 1 212 159 26.8
Other revenue 462 383 401 143 15.3
Expenditure 1 883 808 1 287 443 46.3
Operating expenditure 1 599 225 1 279 684 24.9
Impairment of property, plant and
equipment 13 496 -
Loss on disposal of property plant
and equipment 1 920 141
Goodwill amortised 10 971 7 618
Goodwill impaired 258 196 -
Profit before interest and tax 116 184 325 859 (64.3)
Net interest paid (54 470) (57 450) (5.2)
Interest paid - normal operations (54 470) (57 450)
Interest accrued - Purchase Milton &
Associates (PM&A) 24 986 59 265
Provision against interest accrued
- PM&A (24 986) (59 265)
Net profit before taxation 61 714 268 409 (77.0)
Taxation 93 604 68 411 38.3
Net (loss)/profit from continuing
operations (31 890) 199 998
Discontinued operations
Turnover 654 651 1 619 781
Profit before interest and tax 38 932 56 269
Net interest paid (5 308) (26 667)
Net profit before taxation 33 624 29 602
Taxation 14 287 15 332
Net profit from discontinued operations 19 337 14 270
Headline earnings
Total (loss)/profit attributable to
ordinary shareholders (12 553) 214 268
Adjustments for
Impairment of property, plant and
equipment 9 447 -
Profit on the sale of stores - (18 518)
Profit on sale of Australian
operations (1 738) -
Profit on sale of Intercare (587) -
Loss on disposal of property, plant
and equipment 1 597 1 827
Goodwill amortised 16 272 23 719
Goodwill impaired 258 196 -
Headline earnings 270 634 221 296 22.3
Comprises:
Headline earnings from continuing
operations 248 068 207 715 19.4
Headline earnings from discontinued
operations 22 566 13 581 66.2
Undiluted headline earnings per share
(cents)
All operations 76.5 65.6 16.6
Continuing operations 70.2 61.5 14.0
Diluted headline earnings per
share (cents)
All operations 74.5 64.5 15.5
Continuing operations 68.3 60.6 12.7
Undiluted earnings per share (cents)
All operations (3.6) 63.5
Continuing operations (9.0) 59.2
Diluted earnings per share (cents)
All operations (3.5) 62.5
Continuing operations (8.8) 58.3
Distributions per share (cents)
Paid - July 12.5 10.9 14.7
Proposed/paid - December 22.5 15.1 49.0
Condensed Consolidated Balance Sheet
As at As at
31 August 31 August
2004 2003
(reviewed) (audited)
R`000 R`000
Assets
Non-current assets 859 687 1 452 501
Property, plant and equipment 659 347 747 263
Trademarks 3 930 4 580
Goodwill 98 280 235 288
Deferred taxation assets 71 676 81 363
Loans 26 454 384 007
Current assets 2 273 947 2 001 329
Inventories 1 411 339 1 401 061
Accounts receivable 443 762 417 305
Taxation prepaid 8 442 3 754
Cash on hand 410 404 179 209
Total assets 3 133 634 3 453 830
Equity and liabilities
Capital and reserves
Ordinary shareholders` interest 1 372 697 1 608 510
Non-current liabilities
Loans payable 259 730 343 273
Deferred taxation liabilities 18 770 15 252
Current liabilities 1 482 437 1 486 795
Short-term borrowings 8 710 33 005
Accounts payable 1 390 084 1 373 743
Loans payable 80 819 69 259
Taxation payable 2 824 10 788
Total equity and liabilities 3 133 634 3 453 830
Condensed Consolidated Cash Flow Statement
Year to Year to
31 August 31 August
2004 2003
(reviewed) (audited)
R`000 R`000
Net cash flow from operations 546 696 513 820
Movement in working capital (68 400) 38 893
Net interest paid (59 778) (84 117)
Taxation paid (101 732) (87 145)
Cash effects of operating activities 316 786 381 451
Distributions to ordinary shareholders (97 824) (44 243)
Net cash effects of operating activities 218 962 337 208
Net cash effects of investing activities 164 523 (267 501)
Net cash effects of financing activities (128 115) 188 949
Net increase in cash and cash equivalents 255 370 258 656
Condensed Consolidated Changes in Equity
Year to Year to
31 August 31 August
2004 2003
(reviewed) (audited)
R`000 R`000
Increase in share capital and premium 33 025 340 187
Increase in treasury shares held (122 981) -
Decrease in non-distributable reserve (35 480) (86 097)
Net (loss)/profit for the period (12 553) 214 268
Distributions to shareholders (97 824) (81 605)
Net (decrease)/increase in shareholders` funds (235 813) 386 753
Opening shareholders` interest 1 608 510 1 221 757
Closing shareholders` interest 1 372 697 1 608 510
Percentage decrease in closing shareholders`
interest (14.7)
Supplementary Information
31 August 31 August
2004 2003
Number of ordinary shares in issue (`000) 361 205 354 118
Weighted average number of shares in issue (`000) 353 571 337 587
Weighted average diluted number of shares
in issue (`000) 363 046 342 906
Net asset value per share (cents) 380 454
Net tangible asset value per share (cents) 351 388
Depreciation and amortisation (R`000) 108 021 103 726
Capital expenditure (R`000) 180 959 203 005
Capital commitments (R`000) 225 669 286 183
Segmental Analysis
The split per brand of turnover and profit is as follows:
Year to Year to
31 August 31 August %
2004 2003 change
R`000 R`000
Turnover
Clicks 3 266 065 2 997 226 9.0
Discom 878 703 771 441 13.9
Entertainment 544 221 482 287 12.8
The Body Shop 51 276 45 781 12.0
Pharmacy 523 242 -
New United Pharmaceutical Distributors 2 309 539 1 451 223 59.1
Shared Services 5 825 -
Intragroup elimination (184 720) -
Continuing operations 7 394 151 5 747 958 28.6
Discontinued operations - Australia 654 651 1 619 781
Total 8 048 802 7 367 739 9.2
Profit before interest and tax
Clicks 304 175 259 281 17.3
Discom 5 733 (5 571)
Entertainment 20 594 25 675 (19.8)
The Body Shop 10 258 10 017 2.4
Pharmacy (5 526) -
New United Pharmaceutical Distributors 75 600 51 592 48.5
Shared Services unallocated (7 567) (7 376)
Capital items (284 583) (7 759)
Intragroup elimination (2 500) -
Continuing operations 116 184 325 859
Australia 43 625 49 347 (11.6)
Intercare (1 356) (962) (41.0)
Capital items (3 337) 7 884
Discontinued operations 38 932 56 269
Total 155 116 382 128 (59.4)
Notes
Accounting policies
These reviewed financial results 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 except in the case of accounting for the Share Trust. These results
have been reviewed by KPMG Inc. and their unqualified review report is available
for inspection at the company`s registered office.
The group previously consolidated companies that were controlled by the group.
The group now consolidates all entities over whose financial and operating
policies the group has the power to exercise control. Consequently, the group
now consolidates its Share Trust. The change was effected in order to comply
with JSE Securities Exchange Listings Requirements and AC132 - Consolidated
financial statements. The change in policy has not been applied retrospectively
as the changes required to comparative financial information are not material.
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`).
The sale proceeds were Australian $107 million. Out of these proceeds, New
Clicks retired certain bank debts and financial lease liabilities as at 28
December 2003, amounting to Australian $19.7 million; and the consortium and NCA
redeemed redeemable preference shares held by New Clicks for a redemption
consideration of Australian $67.2 million.
New Clicks received Australian $87.3 million as net sales proceeds from the
disposal, 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 R1.7
million. The profit on sale of R4.4 million reported at interim was adjusted for
final expenses of R2.7 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.
With effect from 1 March 2004 the group disposed of its 80% holding in Intercare
Managed Healthcare (Proprietary) Limited (`Intercare`). A profit of R0.6 million
was realised on the disposal. The results of Intercare were incorporated in the
New Clicks results until 29 February 2004, and have been disclosed separately in
the income statement as discontinued operations.
Change in comparatives
An amount of R34.7 million has been reallocated from other expenses to gross
profit in 2003. This amount relates to discounts granted by New United
Pharmaceutical Distributors (`NUPD`) which were previously included in operating
expenses.
An amount of R69.3 million has been reallocated from loans payable classified as
non-current liabilities to loans payable classified as current liabilities in
2003. This amount relates to the current portion of long-term liabilities. The
reallocation was necessary in order to correctly reflect the maturity profile of
the group`s borrowings.
For segmental reporting purposes, Link Investment Trust and NUPD, which were
previously reported as separate segments, have been combined into a single
segment referred to as NUPD. Comparatives have been restated accordingly.
Commentary
Financial performance
* New Clicks Holdings increased group headline earnings by 22.3% to
R271 million, with diluted headline earnings per share showing a 15.5% increase
to 74.5 cents per share.
* Turnover from continuing operations increased by 28.6% to R7.4 billion, with
the core retail brands growing by 10.5% to R4.7 billion.
* The group increased profit before capital items, interest and taxation from
continuing operations by 20.4% from R333.6 million to R401.8 million.
* The ongoing uncertainty around the implementation of the medicine pricing
regulations and single exit pricing has resulted in the group writing off the
goodwill of R258 million relating to the acquisition of Purchase Milton &
Associates (`PM&A`).
* New Clicks` return on equity (RoE) increased from 15.6% to 18.2%, benefiting
from the write-off of goodwill in PM&A.
Year-on-year comparison of the group`s performance is impacted by:
- the inclusion of NUPD in the results for the full 12-month period (compared
with 8 months in the previous year);
- the results of NCA, which was sold earlier in the year, are included for only
four months (as opposed to the full 12 months in 2003);
- the incorporation of PM&A for the second six months of 2004.
Trading performance
The group`s core retail brands have underperformed management`s expectations in
the second half of the year, impacted by an increasingly challenging FMCG retail
market and the deflationary environment.
Turnover in the core Clicks brand increased by 9% for the year. Turnover for
August in the previous financial year was boosted by the Clicks 35th birthday
promotion and the same level of growth was not repeated this year. The brand
also experienced higher than expected shrinkage, mainly in cellular airtime.
Higher margin homewares merchandise continue to grow satisfactorily.
Discom lifted turnover by 13.9%, with strong growth in FMCG sales and a pleasing
comeback in homeware merchandise. This contributed to Discom returning to
profitability for the first time in several years, reversing an operating loss
of R5.6 million in 2003 and recording an operating profit of R5.7 million. The
brand continues to entrench its dominant position in the African beauty and hair
care market.
The Entertainment division, comprising Musica and CD Wherehouse, recorded strong
growth in the second half of the year through an aggressive promotional
strategy, and increased turnover for the year by 12.8%. However, operating
profit for the year was down 19.8% to R20.6 million mainly as a result of the
poor first half results. The repositioning to a broader entertainment offering
is realising benefits and sales of DVDs, gaming and lifestyle merchandise have
increased from 11.3% to 18.2% of turnover.
Turnover in The Body Shop grew by 12.0% for the year. Operating profit rose by
only 2.4% to R10.3 million, with a poor performance in the second half of the
year reversing the profit growth of the first six months. The brand was impacted
by high expense growth relating mainly to new stores and marketing costs. Stock
turn continues to improve.
NUPD increased turnover strongly during the year to R2.3 billion, and posted an
operating profit of R75.6 million, an increase of 21% over the previous
12 months. The wholesale distributor continued to grow turnover from PM&A
stores, independent pharmacies and single channel distributors. Costs were
tightly managed and the business generated strong cash flows.
The retail pharmacy environment came under intense pressure following the
introduction of the medicine pricing regulations which capped the dispensing fee
levied by pharmacists. New Clicks challenged the new legislation in court, and
litigation continues.
During the second half of the year, 21 PM&A stores were converted to the Clicks
brand, including the opening of dispensaries in three large format Clicks
stores. Turnover in the large format stores has been encouraging and supports
the business model that both front and back shop sales will increase once a
dispensary is introduced into a Clicks store.
Capital management
During the year the group initiated a share repurchase programme, buying back
13 million shares for R99.5 million at an average price of R7.65 per share.
Management aims to continue the repurchase programme. The board decided to
reduce dividend cover from 2.5 to 2.2 times, reflecting a 34.6% increase in the
dividend declared over the prior year.
Prospects
Despite trading in a deflationary environment, the group remains committed to
the strategy and value proposition of the Clicks brand. Steps have been taken to
address shrinkage and the short-term decline in sales. The turnover growth trend
has been restored, with sales for the first seven weeks of the new financial
year increasing by 11.0% over the corresponding period last year.
The outlook for the other retail brands is encouraging, with improved
performances expected from Discom, the Entertainment division and The Body Shop.
The group continues to integrate the pharmacy offering into the larger format
Clicks stores and, based on the performance of the stores that have been
converted to date, the prospects for increased turnover in both the front shop
and the dispensary are positive.
NUPD is well-positioned to increase volumes and capitalise on rationalisation in
the pharmaceutical market.
The group remains committed to improving expense control and focusing on stock
distribution and financial management systems.
Dividend declaration
The board of directors has declared a final cash dividend of 22.5 cents per
share payable on Monday, 20 December 2004 to shareholders recorded in the books
of the company at the close of business on Friday, 17 December 2004. The last
day to trade (`cum` the dividend) in order to participate in the dividend will
be Thursday, 9 December 2004 and the shares will trade `ex dividend` from the
commencement of business on Friday, 10 December 2004. The record date will be
Friday, 17 December 2004.
Share certificates may not be dematerialised or rematerialised between Friday,
10 December 2004 and Friday, 17 December 2004, both dates inclusive.
By order of the Board
ALLAN SCOTT
Company Secretary
20 October 2004
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*,
R.L. Lumb*, L.A. Swartz*, P.E.I. Swartz*, A. Zimbler* * non-executive
Transfer Secretaries: Computershare Investor Services 2004 (Proprietary)
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
