Wrap Text
Interim unaudited financial results for the six months ended 28 February 2013
CLICKS GROUP LIMITED
Registration number: 1996/000645/06
Share code: CLS ISIN: ZAE000134854
CUSIP: 18682W205
INTERIM GROUP RESULTS
for the six months ended 28 February 2013
- Group turnover up 11.4%
- Diluted headline EPS up 8.5%
- Interim dividend up 10.0%
- Return on equity at 58.2%
Commentary
Overview and trading environment
Trading conditions have remained challenging in the first half
of the 2013 financial year, particularly for the Clicks chain,
where its middle income customers are facing increasing
financial pressures.
Constrained consumer spending has resulted in slower revenue
growth, compounded by relatively low selling price inflation.
Despite these headwinds, Clicks has strengthened its
competitive position and gained share in all of its core health and
beauty markets. The group's other retail brands, Musica and
The Body Shop, both performed well.
UPD's integrated pharmaceutical wholesale and distribution
strategy continues to gain traction. The business showed
strong turnover growth in the period and recorded market
share gains in both wholesale and distribution.
The group's return on equity is at a sector leading 58.2%.
Financial performance
Group turnover increased by 11.4% to R8.5 billion, with
selling price inflation of 2.0% for the period. Retail sales
increased by 6.3% and UPD lifted turnover by 20.3%. All
the group's businesses recorded real volume growth in these
tough trading conditions.
Total income increased by 7.9% and the total income
margin reduced from 28.0% to 27.1% as a result of UPD
growing faster than the retail business. The retail total
income margin improved by 20 basis points to 33.0%.
Operating expenses were 7.6% higher. Retail costs increased
by 6.7% despite the continuing investment in pharmacy,
stores and IT systems. On a comparable basis, retail
cost growth was contained to 5.1%. UPD's cost growth of
15.3% includes further investment in distribution capacity,
with comparable costs increasing by 6.0%.
Operating profit increased by 8.7% and the group operating
margin was 20 basis points lower at 6.2% as a result of the
faster growth rate in the lower margin UPD business.
Headline earnings increased by 10.0% to R366 million.
Diluted headline earnings per share grew by 8.5% to
142.7 cents, reflecting the dilutionary impact of the group's
broad-based employee share ownership scheme.
The interim dividend was increased by 10.0% to 48.5 cents
per share.
Inventory days in stock moved from 66 to 71 days. Inventory
levels were 21.8% higher as UPD bought in stock ahead
of the increase in the single exit price of medicines and Clicks
invested in stock to improve availability.
The group remains strongly cash generative with cash
inflow from operations increasing 14% to R244 million.
During the period R451 million was returned to shareholders
through distribution payments and share buy-backs as
part of the group's ongoing commitment to return excess
cash to shareholders. Capital expenditure of R145 million
was incurred in the first half and the group plans to invest
R335 million for the full financial year.
Trading performance
Turnover growth of 7.0% in Clicks was driven by increased
promotional activity. Comparable store sales grew by 4.3%.
The Clicks store footprint was extended to 430, with 324
having in-store pharmacies. Membership of the Clicks
ClubCard loyalty programme reached the four million mark
during the period. The Clicks operating profit increased by
6.0% while the operating margin was maintained at 6.9%.
Musica increased operating profit by 27.3% through tight cost
management. The brand continued to gain market share in
CDs and DVDs, despite the net closure of eight stores. The
Body Shop increased turnover by 10.1% and operating profit
by 10.9%.
UPD increased turnover by 20.3% and grew its share of
the private pharmaceutical market from 23.2% to 25.7%.
UPD now services 20 distribution agency contracts. The
operating margin declined to 2.4%, in line with the targeted
guidance. Operating profit for the period increased by 13.1%.
Prospects
The group aims to further strengthen its position in health and
beauty retail and supply.
The retail environment will remain tough for the Clicks chain
and selling price inflation is expected to average 4% - 5%
for the second half of the year. In these conditions the focus
will be on driving revenue growth, maintaining margin and
containing costs.
UPD will also continue to drive turnover growth while
optimising costs and driving efficiencies.
Full-year earnings forecast
The group anticipates that diluted headline earnings per
share for the year to 31 August 2013 will increase by between
5% and 10% over the previous financial year.
This forecast is based on the following assumptions: Retail
trading conditions are expected to remain challenging
as consumer spending remains subdued; selling price
inflation will be relatively low for the year; and cost pressures
will remain as the group continues to invest in pharmacies,
stores and distribution capacity to ensure sustainable growth.
Shareholders are advised that this forecast has not been
reviewed or reported on by the group's independent auditor.
Interim dividend
The board of directors has approved an interim ordinary
dividend of 48.5 cents per share (2012: 44.1 cents per share).
The source of the dividend will be from distributable reserves
and paid in cash.
Additional information
No Secondary Tax on Companies ("STC") credits have been
utilised as part of this declaration.
Dividends Tax ("DT") amounting to 7.275 cents per ordinary
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 41.225 cents net of DT.
The company has 268 323 498 ordinary 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 interim dividend:
Last day to trade "cum" the dividend Friday, 21 June 2013
Shares trade "ex" the dividend Monday, 24 June 2013
Record date Friday, 28 June 2013
Payment to shareholders Monday, 1 July 2013
Share certificates may not be dematerialised or re-materialised
between Monday, 24 June 2013 and Friday, 28 June 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, 21 June 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
25 April 2013
Consolidated statement of comprehensive income
Six months to Six months to Year to
28 February 29 February 31 August
2013 2012 % 2012
R'000 (unaudited) (unaudited) change (audited)
Revenue 8 942 617 8 022 039 11.5 16 243 377
Turnover 8 529 084 7 657 499 11.4 15 436 947
Cost of merchandise sold (6 626 166) (5 873 924) 12.8 (11 961 536)
Gross profit 1 902 918 1 783 575 6.7 3 475 411
Other income 410 714 361 200 13.7 800 554
Total income 2 313 632 2 144 775 7.9 4 275 965
Expenses (1 782 244) (1 655 839) 7.6 (3 264 637)
Depreciation and amortisation (97 702) (83 309) 17.3 (171 535)
Occupancy costs (247 185) (229 697) 7.6 (471 897)
Employment costs (888 089) (817 255) 8.7 (1 582 459)
Other costs (549 268) (525 578) 4.5 (1 038 746)
Operating profit 531 388 488 936 8.7 1 011 328
Loss on disposal of property, plant and equipment (3 632) (2 579) 40.8 (6 578)
Profit before financing costs 527 756 486 357 8.5 1 004 750
Net financing costs (19 582) (25 108) (22.0) (46 396)
Financial income 2 819 3 340 (15.6) 5 876
Financial expense (22 401) (28 448) (21.3) (52 272)
Profit before taxation 508 174 461 249 10.2 958 354
Income tax expense (144 336) (130 078) 11.0 (269 974)
Profit for the period 363 838 331 171 9.9 688 380
Other comprehensive (loss)/income:
Exchange differences on translation of foreign
subsidiaries (685) (93) 1 615
Items that may be subsequently reclassified
to profit or loss
Cash flow hedges (2 902) (3 003) 1 485
Change in fair value of effective portion (4 031) (4 171) 2 063
Deferred tax on movement of effective portion 1 129 1 168 (578)
Other comprehensive (loss)/income for the
period, net of tax (3 587) (3 096) 3 100
Total comprehensive income for the period 360 251 328 075 691 480
Profit attributable to:
Equity holders of the parent 363 560 331 085 688 687
Non-controlling interest 278 86 (307)
363 838 331 171 688 380
Total comprehensive income attributable to:
Equity holders of the parent 359 973 327 989 691 787
Non-controlling interest 278 86 (307)
360 251 328 075 691 480
Earnings per share (cents) 144.3 130.8 10.3 272.0
Diluted earnings per share (cents) 141.7 130.8 8.3 271.9
Headline earnings reconciliation
Six months to Six months to Year to
28 February 29 February 31 August
2013 2012 % 2012
R'000 (unaudited) (unaudited) change (audited)
Total profit for the period attributable to equity
holders of the parent 363 560 331 085 688 687
Adjusted for:
Loss on disposal of property, plant and equipment 2 615 1 857 4 736
Insurance recovery income (1 018)
Headline earnings 366 175 332 942 10.0 692 405
Headline earnings per share (cents) 145.4 131.6 10.5 273.5
Diluted headline earnings per share (cents) 142.7 131.5 8.5 273.4
Condensed consolidated statement of financial position
As at As at As at
28 February 29 February 31 August
2013 2012 2012
R'000 (unaudited) (unaudited) (audited)
Non-current assets 1 537 467 1 413 884 1 490 348
Property, plant and equipment 1 036 047 959 216 1 010 657
Intangible assets 319 911 301 510 306 286
Goodwill 103 510 103 510 103 510
Deferred tax assets 66 298 43 870 57 401
Loans receivable 11 701 5 778 12 494
Current assets 3 996 523 3 216 643 3 286 064
Inventories 2 509 186 2 060 097 2 080 375
Trade and other receivables 1 430 093 1 053 883 1 171 541
Loans receivable 9 181 3 710
Cash and cash equivalents 56 284 88 401 25 451
Derivative financial assets 960 5 081 4 987
Total assets 5 533 990 4 630 527 4 776 412
Equity and liabilities
Total equity 1 268 919 1 082 755 1 348 904
Non-current liabilities 270 002 254 031 286 601
Employee benefits 87 032 83 675 105 989
Deferred tax liabilities 36 962 38 254 39 555
Operating lease liability 146 008 132 102 141 057
Current liabilities 3 995 069 3 293 741 3 140 907
Trade and other payables 3 247 165 2 567 899 2 768 759
Employee benefits 109 902 124 637 109 861
Provisions 8 828 2 167 8 828
Interest-bearing borrowings 592 962 545 603 214 566
Income tax payable 35 811 47 718 37 536
Derivative financial liabilities 401 5 717 1 357
Total equity and liabilities 5 533 990 4 630 527 4 776 412
Condensed consolidated statement of cash flows
Six months to Six months to Year to
28 February 29 February 31 August
2013 2012 2012
R'000 (unaudited) (unaudited) (audited)
Operating profit before working capital changes 651 562 591 237 1 235 114
Working capital changes (233 887) (235 462) (161 586)
Net interest paid (14 218) (17 307) (33 465)
Taxation paid (159 923) (124 043) (276 458)
Cash inflow from operating activities before distributions 243 534 214 425 763 605
Distributions paid to shareholders (273 225) (225 616) (337 285)
Net cash effects of operating activities (29 691) (11 191) 426 320
Net cash effects of investing activities (140 265) (90 457) (247 949)
Capital expenditure (145 460) (99 672) (255 789)
Other investing activities 5 195 9 215 7 840
Net cash effects of financing activities 200 789 172 259 (170 710)
Purchase of treasury shares (177 607) (12 013)
Other financing activities 378 396 172 259 (158 697)
Net increase in cash and cash equivalents 30 833 70 611 7 661
Condensed consolidated statement of changes in equity
Six months to Six months to Year to
28 February 29 February 31 August
2013 2012 2012
R'000 (unaudited) (unaudited) (audited)
Opening balance 1 348 904 965 187 965 187
Purchase of treasury shares (177 607) (12 013)
Disposal of treasury shares 1 973 1 973
Distributions to shareholders (273 225) (225 616) (337 285)
Withholding tax on prior period interim dividend* (11 234)
Total comprehensive income for the period 360 251 328 075 691 480
Share-based payment reserve movement 21 830 13 136 39 562
Total 1 268 919 1 082 755 1 348 904
Dividend per share (cents)
Interim declared/paid 48.5 44.1 44.1
Final paid 107.9
48.5 44.1 152.0
* Refer to note 1.3.
Segmental analysis
The group's reportable segments under IFRS 8 are as follows:
Clicks, Musica, The Body Shop and United Pharmaceutical Distributors (UPD, including Clicks Direct Medicines)
Profit
before Total Capital Total
R'000 Turnover taxation assets expenditure liabilities
Six months to 28 February 2013
(unaudited)
Clicks 5 600 637 384 284 2 527 256 85 686 1 503 226
Musica 501 631 46 896 207 372 8 457 154 894
The Body Shop 74 221 17 061 36 552 2 584 12 014
UPD 3 480 118 84 702 2 931 759 24 585 2 411 777
Inter-segmental (1 127 523) (1 555) (881 366) (870 673)
Total reportable segmental balance 8 529 084 531 388 4 821 573 121 312 3 211 238
Non-reportable segmental balance (23 214) 712 417 24 148 1 053 833
Total group balance 8 529 084 508 174 5 533 990 145 460 4 265 071
Six months to 29 February 2012
(restated)*
Clicks 5 236 580 362 656 2 365 950 71 917 1 322 409
Musica 504 913 36 843 226 262 2 193 184 155
The Body Shop 67 415 15 384 26 958 1 239 13 939
UPD 2 893 111 74 879 2 145 526 5 096 1 750 325
Inter-segmental (1 044 520) (826) (856 438) (844 711)
Total reportable segmental balance 7 657 499 488 936 3 908 258 80 445 2 426 117
Non-reportable segmental balance (27 687) 722 269 19 227 1 121 655
Total group balance 7 657 499 461 249 4 630 527 99 672 3 547 772
Twelve months to 31 August 2012
(restated)*
Clicks 10 401 136 785 999 2 431 343 177 175 1 437 554
Musica 871 515 42 810 177 761 9 410 131 624
The Body Shop 122 972 23 837 31 978 3 770 12 794
UPD 6 277 104 156 919 2 452 249 33 427 1 979 544
Inter-segmental (2 235 780) 1 763 (1 011 695) (1 002 557)
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
Six months to Six months to Year to
28 February 29 February 31 August
2013 2012 2012
(unaudited) (unaudited) (audited)
Non-reportable segmental profit before taxation consists of:
Loss on disposal of property, plant and equipment (3 632) (2 579) (6 578)
Financial income 2 819 3 340 5 876
Financial expense (22 401) (28 448) (52 272)
(23 214) (27 687) (52 974)
* Refer to note 1.2.
Supplementary information
As at As at As at
28 February 29 February 31 August
2013 2012 2012
(unaudited) (unaudited) (audited)
Number of ordinary shares in issue (gross) ('000) 268 323 276 123 276 123
Number of ordinary shares in issue including "A" shares issued
in terms of employee share ownership programme (gross) ('000) 297 477 305 277 305 277
Number of ordinary shares in issue (net of treasury shares) ('000) 249 984 253 259 253 042
Weighted average number of shares in issue (net of treasury
shares) ('000) 251 918 253 063 253 154
Weighted average diluted number of shares in issue (net of treasury
shares) ('000) 256 652 253 191 253 258
Net asset value per share (cents) 508 428 533
Net tangible asset value per share (cents) 338 268 371
Depreciation and amortisation (R'000) 102 121 87 354 181 102
Capital expenditure (R'000) 145 460 99 672 255 789
Capital commitments (R'000) 189 540 182 826 355 700
Notes
Accounting policies
1.1 These interim financial results for the six months ended 28 February 2013 have been prepared in compliance with International
Financial Reporting Standards ("IFRS"), the AC 500 Standards as issued by SAICA, the disclosure requirements of IAS 34 and the
South African Companies Act (71 of 2008, as amended).
The accounting policies used in the preparation of the interim financial results for the six months ended 28 February 2013, are
in terms of IFRS and are consistent with those applied in the Audited Financial Statements for the year ended 31 August 2012,
except for the standards and amendments to standards that became effective on 1 January 2012 and 1 July 2012 together
with the change in segmental disclosure due to the change in reporting lines as detailed in note 1.2 below: Amendment to
IAS 12 Deferred Tax: Recovery of Underlying Assets; Amendment to IAS 1 Presentation of Financial Statements: Presentation
of Items of Other Comprehensive Income. These amendments have been applied for the first time in the group's financial year
commencing 1 September 2012. The amendments did not result in any material change to the financial results.
The information contained in the interim report has neither been audited nor reviewed by the group's external auditors. These
condensed financial statements have been prepared under the supervision of M Fleming CA(SA), the Chief Financial Officer of the group.
1.2 The Segmental Analysis for the six months to 29 February 2012 and 12 months to 31 August 2012 have been restated
due to the group's decision to change the composition of its reportable segments. This was required due to a change in
management reporting lines. In the current financial year Clicks Direct Medicines has been restated to be included within the
UPD business as it now reports through to UPD. In the prior year, the business was reported as part of Clicks. This has resulted
in a decrease in total assets in Clicks of R52.7 million (29 February 2012) and R47.4 million (31 August 2012), a decrease
in total liabilities of R36.1 million (29 February 2012) and R35.8 million (31 August 2012) and a decrease in operating profit
of R0.2 million (29 February 2012) and R1.9 million (31 August 2012). Within UPD total assets increased by R22.2 million
(29 February 2012) and R21.2 million (31 August 2012), total liabilities increased by R5.6 million (29 February 2012) and
R9.6 million (31 August 2012) and operating profit increased by R0.2 million (29 February 2012) and R1.9 million (31 August 2012).
1.3 Dividend withholding tax relating to a retrospective change in tax legislation affecting the 2012 interim dividend.
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
Registration number: 1996/000645/06 Share code: CLS ISIN: ZAE000134854 CUSIP: 18682W205
This information, together with additional detail, is available on the Clicks Group website: www.clicksgroup.co.za
Date: 25/04/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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