| Wed 6 Apr 2005, 13:29 | | TRADING STATEMENT |
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New Clicks Holdings - Trading Statement
New Clicks Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/000645/06)
JSE share code: NCL
ISIN: ZAE000014585
(`New Clicks` or `the group`)
TRADING STATEMENT
New Clicks anticipates that diluted earnings per share for the group for the six
months ended 28 February 2005 will be between 12% and 17% lower than the
corresponding period of the previous year, and that diluted headline earnings
per share for the group for the period will be between 14% and 19% lower than
the previous year.
On a continuing operations basis, it is anticipated that diluted earnings per
share for the six months ended 28 February 2005 will be between 1% lower and 4%
higher than the corresponding period of the previous year, and that diluted
headline earnings per share for the period will be between 4% lower and 1%
higher than the previous year.
While the turnover of the group`s retail trading brands has been in line with
the levels indicated in the trading update issued on 17 January 2005, the
operating profit of the Clicks brand in the first half of the year has been
disappointing. This can be attributed to the following factors:
- Shrinkage in the inventory of the brand was significantly higher than
anticipated for the period;
- While the brand has experienced low inflation and even deflation in its
selling prices, it has been difficult to keep cost increases at the same
low levels, especially with staff and rental costs which make up the
majority of expenses;
- Marketing costs increased as the brand attempted to grow its market share.
However, these promotions did not result in the anticipated volume growth;
and
- Due to the re-engineering of enterprise-wide information systems, as
detailed in the latest annual report, there has been an increase in
information technology costs. While this impacts all the retail brands,
Clicks bears the largest portion of the cost.
In addition, the pharmacy operations, which have been included in Clicks`
results for the current period, but which were not consolidated in the prior
period, incurred a pre-tax loss of R39 million for the six months, mainly in the
non-integrated and smaller Clicks pharmacies. This loss is in part due to the
low margin allowed in terms of the medicine pricing regulations. The group is
aggressively implementing its pharmacy strategy, as outlined in the annual
report, which is confirmed by the performance of the integrated pharmacies
(dispensaries in larger Clicks stores) to date, which have shown a definite
uplift in store turnover.
The performance of the other retail trading brands has exceeded management`s
expectations, in particular Discom and the Entertainment Division. New United
Pharmaceutical Distributors (UPD), the group`s wholesale distributor, has also
achieved a substantial growth in earnings in the period.
The reduction in group earnings is also due partly to the return on the cash
received on the sale of the Australian operations not contributing as much as
the performance of those operations, which were included in the comparative
period for the four months to 31 December 2003. However, there has been a
positive impact on earnings per share from the share repurchase programme
initiated in June 2004, which utilised part of these sale proceeds.
New Clicks` results for the six months ended 28 February 2005 will be released
on SENS on Thursday, 21 April 2005.
The financial information on which this trading statement is based has not been
reviewed or reported on by the company`s auditors.
Cape Town
6 April 2005
For further information contact:
Tier 1 Investor Relations
Tel: +27 (21) 702 3102
Sponsor
Investec Bank Limited
Date: 06/04/2005 01:28:02 PM
Produced by the JSE SENS Department
