Wrap Text
Reviewed Preliminary Group Results
CLICKS GROUP LIMITED
Registration number: 1996/000645/06
Share code: CLS ISIN: ZAE000134854
REVIEWED PRELIMINARY GROUP RESULTS
for the year ended 31 August 2012
- Group turnover up 9.2%
- Diluted headline EPS up 9.5%
- Total distribution up 21.6%
- Return on equity of 59.9%
Commentary
Trading environment
Middle income consumers in the Clicks target market have remained under financial pressure
over the past year. The health and beauty markets in which the group operates have
been reliant on promotional activity to sustain sales volumes and attract value-conscious
consumers. As anticipated, selling price inflation has remained low.
In this environment the group has focused on staying competitive and maintaining tight
expense control while continuing to invest for long-term growth.
Despite the trading challenges, the appeal of the Clicks brand remains strong and the chain
gained market share in all key product categories. The Clicks ClubCard loyalty base grew by
over 300 000 to 3.9 million active members.
Musica and The Body Shop both performed well.
UPD showed an improved performance as the distribution agency business gained further
momentum. This assisted UPD in growing its share of the private pharmaceutical wholesale
market from 23.1% to 24.3%.
Financial performance
Group turnover increased by 9.2% to R15.4 billion, with selling price inflation of 0.5% for the
year. Retail turnover grew by 8.2% with inflation of 0.7%, while UPD increased turnover by
11.1% with price inflation averaging only 0.1%. All the group's businesses showed real sales
growth in this low inflationary environment.
Total income increased by 8.4% and the total income margin was 20 basis points lower at
27.7%, reflecting the impact of the strong promotional programme in Clicks and the faster
growth of UPD.
Operating expenses were 8.5% higher. Retail costs increased by 8.1% with the continued
investment in new stores, pharmacies and IT systems. On a comparable basis, retail cost
growth was contained to 5.0%. UPD's cost growth of 13.0% includes further investment in
distribution capacity, with comparable costs increasing by 6.7%.
Operating profit increased by 7.9% and exceeded R1 billion for the first time. The group's operating
margin was maintained at 6.6% despite the trading pressures encountered during the year.
Headline earnings increased by 5.6% to R692 million. Diluted headline earnings per share
grew by 9.5% to 273.4 cents, in line with the earnings growth forecast provided with the
group's interim results in April 2012.
Inventory days in stock moved from 60 to 63 days. Inventory levels were 15.4% higher at
year-end as Clicks increased stock levels to improve availability and introduce more new
products. UPD stock levels were higher owing to the new distribution contracts taken on
during the period.
Cash generated by operations (before interest and taxation) increased to R1.1 billion.
The group returned R349 million to shareholders through distribution payments and share
buy-backs while R256 million was invested in capital expenditure.
The total distribution to shareholders for the financial year was increased by 21.6% to
152.0 cents per share, based on a reduced distribution cover of 1.8 times.
Return on shareholders' equity (ROE) remains at an industry leading level of 59.9%.
Trading performance
Clicks increased turnover by 9.2% as inflation averaged only 1.2% for the year. Comparable
store sales grew by 5.9%. The chain's store footprint was expanded to 420 following the
opening of a net 20 new stores. The pharmacy base was extended by 23 to 306. Operating
profit increased by 4.9% and the operating margin of 7.4% remains within the medium-term
target range of 7% to 8%.
Musica gained market share in CDs, DVDs and gaming. The ongoing right-sizing of the
brand which resulted in the net closure of a further 14 stores contributed to operating profit
increasing by 36.3%. The Body Shop increased turnover by 14.1% with price deflation of
1.9%, and grew operating profit by 15.9%.
UPD increased wholesale turnover by 11.1%. Ten new agency distribution contracts were
awarded during the year and this trebled the notional turnover of the distribution business to
R1.7 billion. UPD increased its operating margin to 2.5% and lifted operating profit by 18.5%.
Prospects
Growth in consumer spending is expected to remain muted in the year ahead and the health
and beauty markets will continue to be promotionally driven. Selling price inflation is currently
anticipated to remain at low single-digit levels.
The group's focus in this trading environment will therefore be on growing sales volumes and
containing costs.
Capital expenditure of R356 million has been committed for 2013 for new stores, new
pharmacies, store revamps, IT systems and the expansion of UPD's distribution infrastructure.
Trading space is planned to increase by 4% to 5%.
The group's brands are all leaders in their respective markets and have proven track records
of gaining market share. Based on the growth potential of Clicks and UPD, together with the
group's strong cash-generating ability, management is confident of achieving its medium-
term financial targets.
Final dividend
The board of directors has approved a final ordinary dividend of 107.9 cents per share (2011:
88.0 cents per share) and a 15.2 cents per ordinary "A" share (2011: 12.5 cents per share).
The source of the dividends will be from distributable reserves and paid in cash.
Additional information
No Secondary Tax on Companies ("STC") credits have been utilised as part of these
declarations.
Dividends Tax ("DT") amounting to 16.185 cents per ordinary share and 2.28 cents per
ordinary "A" share will be withheld in terms of the Income Tax Act. Ordinary shareholders
who are not exempt from DT will therefore receive a dividend of 91.715 cents net of DT and
ordinary "A" shareholders will receive a dividend of 12.92 cents net of DT.
The company has 276 123 498 ordinary shares and 29 153 295 ordinary "A" shares in issue.
Its income tax reference number is 9061/745/71/8.
Shareholders are advised of the following salient dates in respect of the final dividends:
Last day to trade "cum" the dividend Friday, 18 January 2013
Shares trade "ex" the dividend Monday, 21 January 2013
Record date Friday, 25 January 2013
Payment to shareholders Monday, 28 January 2013
Share certificates may not be dematerialised or rematerialised between Monday,
21 January 2013 and Friday, 25 January 2013, both days inclusive.
The directors of the company have determined that dividend cheques amounting to R50.00
or less due to any ordinary shareholder will not be paid unless a written request to the contrary
is delivered to the transfer secretaries, Computershare Investor Services (Proprietary) Limited,
by no later than close of business on Friday, 18 January 2013, being the day the shares trade
"cum" the dividend. Unpaid dividend cheques will be aggregated with other such amounts
and donated to a charity to be nominated by the directors.
By order of the board
David Janks
Company secretary
18 October 2012
Consolidated statement of comprehensive income
Year to Year to
31 August 31 August
2012 2011 %
R'000 (reviewed) (audited) change
Revenue 16 243 377 14 833 118 9.5
Turnover 15 436 947 14 135 948 9.2
Cost of merchandise sold (11 961 536) (10 879 173) 9.9
Gross profit 3 475 411 3 256 775 6.7
Other income 800 554 688 935 16.2
Total income 4 275 965 3 945 710 8.4
Expenses (3 264 637) (3 008 120) 8.5
Depreciation and amortisation (171 535) (149 714) 14.6
Occupancy costs (471 897) (422 596) 11.7
Employment costs (1 582 459) (1 496 491) 5.7
Other costs (1 038 746) (939 319) 10.6
Operating profit 1 011 328 937 590 7.9
Loss on disposal of property, plant and
equipment (6 578) (6 250)
Profit before financing costs 1 004 750 931 340 7.9
Net financing costs (46 396) (33 626) 38.0
Financial income 5 876 8 235 (28.6)
Financial expense (52 272) (41 861) 24.9
Profit before taxation 958 354 897 714 6.8
Income tax expense (269 974) (246 749) 9.4
Profit for the year 688 380 650 965 5.7
Other comprehensive income/(loss):
Exchange differences on translation of foreign
subsidiaries 1 615 (220)
Cash flow hedges 1 485 2 105
Change in fair value of effective portion 2 063 2 924
Deferred tax on movement of effective portion (578) (819)
Other comprehensive income for the
year, net of tax 3 100 1 885
Total comprehensive income for the year 691 480 652 850
Profit attributable to:
Equity holders of the parent 688 687 650 932
Non-controlling interest (307) 33
688 380 650 965
Total comprehensive income attributable to:
Equity holders of the parent 691 787 652 817
Non-controlling interest (307) 33
691 480 652 850
Earnings per share (cents) 272.0 248.3 9.5
Diluted earnings per share (cents) 271.9 248.0 9.6
Headline earnings reconciliation
Year to Year to
31 August 31 August
2012 2011 %
R'000 (reviewed) (audited) change
Total profit for the year attributable to equity
holders of the parent 688 687 650 932
Adjusted for:
Loss on disposal of property, plant and
equipment 4 736 4 500
Insurance recovery income (1 018)
Headline earnings 692 405 655 432 5.6
Headline earnings per share (cents) 273.5 250.1 9.4
Diluted headline earnings per share (cents) 273.4 249.7 9.5
Condensed consolidated statement of financial position
As at As at
31 August 31 August
2012 2011
R'000 (reviewed) (audited)
Non-current assets 1 490 348 1 414 484
Property, plant and equipment 1 010 657 949 906
Intangible assets 306 286 301 579
Goodwill 103 510 103 510
Deferred tax assets 57 401 53 756
Loans receivable 12 494 5 733
Current assets 3 286 064 2 840 299
Inventories 2 080 375 1 802 557
Trade and other receivables 1 171 541 998 944
Loans receivable 3 710 17 901
Cash and cash equivalents 25 451 17 790
Derivative financial assets 4 987 3 107
Total assets 4 776 412 4 254 783
Equity and liabilities
Total equity 1 348 904 965 187
Non-current liabilities 286 601 264 829
Interest-bearing borrowings 19
Employee benefits 105 989 92 473
Deferred tax liabilities 39 555 46 695
Operating lease liability 141 057 125 642
Current liabilities 3 140 907 3 024 767
Trade and other payables 2 768 759 2 431 756
Employee benefits 109 861 164 669
Provisions 8 828 5 217
Interest-bearing borrowings 214 566 375 217
Income tax payable 37 536 44 489
Derivative financial liabilities 1 357 3 419
Total equity and liabilities 4 776 412 4 254 783
Condensed consolidated statement of cash flows
Year to Year to
31 August 31 August
2012 2011
R'000 (reviewed) (audited)
Operating profit before working capital changes 1 235 114 1 075 227
Working capital changes (161 586) (105 055)
Net interest paid (33 465) (21 113)
Taxation paid (276 458) (271 988)
Cash inflow from operating activities before distributions 763 605 677 071
Dividends/distributions paid to shareholders (337 285) (295 507)
Net cash flows from operating activities 426 320 381 564
Net cash flows from investing activities (247 949) (209 353)
Capital expenditure (255 789) (215 701)
Acquisition of businesses (10 225)
Other investing activities 7 840 16 573
Net cash flows from financing activities (170 710) (306 473)
Purchase of treasury shares (12 013) (552 406)
Other financing activities (158 697) 245 933
Net increase/(decrease) in cash and cash equivalents 7 661 (134 262)
Condensed consolidated statement of changes in equity
Year to Year to
31 August 31 August
2012 2011
R'000 (reviewed) (audited)
Opening balance 965 187 1 141 328
Purchase of treasury shares (12 013) (552 406)
Disposal of treasury shares 1 973 2 579
Total comprehensive income for the year 691 480 652 850
Share-based payment reserve movement 39 562 16 343
Dividends/distributions to shareholders (337 285) (295 507)
Total 1 348 904 965 187
Dividend/distribution per share (cents)
Interim paid 44.1 37.0
Final declared/paid 107.9 88.0
152.0 125.0
Segmental analysis
The group's reportable segments under IFRS 8 are as follows:
Clicks (including Clicks Direct Medicines), Musica, The Body Shop and United Pharmaceutical
Distributors (UPD)
Profit Capital
before Total expendi- Total
R'000 Turnover taxation assets ture liabilities
Year to 31 August 2012
(reviewed)
Clicks 10 685 592 787 866 2 478 786 178 562 1 473 333
Musica 871 515 42 810 177 761 9 410 131 624
The Body Shop 122 972 23 837 31 978 3 770 12 794
United Pharmaceutical
Distributors 6 223 807 155 052 2 430 961 32 040 1 969 920
Inter-segmental (2 466 939) 1 763 (1 037 850) (1 028 712)
Total reportable segmental
balance 15 436 947 1 011 328 4 081 636 223 782 2 558 959
Non-reportable segmental
balance (52 974) 694 776 32 007 868 549
Total group balance 15 436 947 958 354 4 776 412 255 789 3 427 508
Year to 31 August 2011
(audited)
Clicks 9 789 459 750 836 2 234 077 173 278 1 385 885
Musica 895 600 31 418 202 074 10 520 98 843
The Body Shop 107 786 20 575 24 090 1 797 13 139
United Pharmaceutical
Distributors 5 601 891 130 808 1 951 839 10 701 1 651 787
Inter-segmental (2 258 788) 3 953 (835 282) (824 381)
Total reportable segmental
balance 14 135 948 937 590 3 576 798 196 296 2 325 273
Non-reportable segmental
balance (39 876) 677 985 19 405 964 323
Total group balance 14 135 948 897 714 4 254 783 215 701 3 289 596
Year to Year to
31 August 31 August
2012 2011
R'000 (reviewed) (audited)
Non-reportable segmental profit before taxation consists of:
Loss on disposal of property, plant and equipment (6 578) (6 250)
Financial income 5 876 8 235
Financial expense (52 272) (41 861)
(52 974) (39 876)
Supplementary information
Year to Year to
31 August 31 August
2012 2011
(reviewed) (audited)
Number of ordinary shares in issue (gross) ('000) 276 123 270 652
Number of ordinary shares in issue including "A" shares issued in
terms of employee share ownership programme (gross) ('000) 305 277 299 805
Number of ordinary shares in issue (net of treasury shares) ('000) 253 042 252 959
Weighted average number of shares in issue
(net of treasury shares) ('000) 253 154 262 118
Weighted average diluted number of shares in issue
(net of treasury shares) ('000) 253 258 262 515
Net asset value per share (cents) 533 382
Net tangible asset value per share (cents) 371 221
Depreciation and amortisation (R'000) 181 102 158 285
Capital expenditure (including acquisition of businesses) (R'000) 255 789 225 926
Capital commitments (R'000) 355 700 257 100
Notes
Auditor's preliminary report
1.1 KPMG Inc., the group's independent auditor, has reviewed the condensed consolidated preliminary
financial statements contained in this preliminary report, and has expressed an unqualified review
conclusion on the condensed consolidated preliminary financial statements. Their review report is
available for inspection at the company's registered office. These condensed consolidated preliminary
financial statements for the year ended 31 August 2012 have been prepared in accordance with
framework concepts, the measurement and recognition requirements of International Financial
Reporting Standards ("IFRS"), the AC 500 Standards as issued by the Accounting Practices Board,
and includes the information required by IAS 34 Interim Financial Reporting and the Companies Act of
2008. The accounting policies used to prepare this report have been consistently applied with those
adopted in the previous annual financial statements.
These condensed financial statements have been prepared under the supervision of M Fleming
CA(SA), the Chief Financial Officer of the group.
Registered address: Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Directors: F Abrahams*, JA Bester*, BD Engelbrecht, M Fleming (Chief Financial Officer),
F Jakoet*, DA Kneale# (Chief Executive Officer), N Matlala*, DM Nurek* (Chairman),
M Rosen* * Independent non-executive # British
Transfer secretaries: Computershare Investor Services (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 Clicks Group Limited website: www.clicksgroup.co.za
Date: 18/10/2012 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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