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CLICKS GROUP LIMITED - Preliminary Reviewed Condensed Results for the year ended 31 August 2013

Release Date: 24/10/2013 08:00
Code(s): CLS     PDF:  
Wrap Text
Preliminary Reviewed Condensed Results
for the year ended 31 August 2013

CLICKS GROUP LIMITED
Registration number: 1996/000645/06 
Share code: CLS
ISIN: ZAE000134854 
CUSIP: 18682W205


PRELIMINARY REVIEWED CONDENSED RESULTS
for the year ended 31 August 2013


Group turnover up 13.6%
Diluted headline EPS up 9.2%
Total dividend up 10.5%
Return on equity of 55.6%


COMMENTARY
OVERVIEW AND TRADING ENVIRONMENT
Consumers in the middle income market, which represent the core customer in Clicks, 
have remained under pressure over the past year. 

This pressure is evident in the low level of real growth in the private healthcare 
market and the continued reliance on promotional activity to drive volume in the 
health and beauty markets. These factors have also contributed to selling price 
inflation remaining constrained.

The Clicks chain reported improved sales growth in the second half of the year, 
despite the headwinds facing the consumer. Clicks has strengthened its competitive 
position and gained share in all of its core health and beauty markets. 

UPD continues to achieve its strategic objectives and increased total managed turnover
by 43.9% to R11.5 billion. This includes wholesale turnover and notional turnover 
managed on behalf of distribution agency clients.

The group's solid financial and operational performance for the year has resulted in 
the return on equity again being at a sector-leading 55.6%.

FINANCIAL PERFORMANCE
Group turnover increased by 13.6% to R17.5 billion, with continued low selling price 
inflation which averaged 2.6% for the year. Retail sales grew by 7.9% while UPD 
increased turnover by 22.8%. All the group's businesses recorded volume growth in the 
tough consumer economic climate. 

Total income increased by 9.8%. The retail total income margin improved by 30 basis 
points to 33.3% driven by private label margin growth and well managed promotions in 
Clicks. UPD's margin was impacted by supplier mix and declined from 8.9% to 8.5%. 

Operating expenses grew by 10.0%. Retail costs increased by 9.6% with continuing 
investment in pharmacy, stores and IT systems. Comparable retail cost growth was 
contained to 7.8%. UPD's cost growth of 14.3% includes additional variable bulk 
distribution and temporary warehouse costs, with comparable costs increasing by 6.1%.

Operating profit increased by 9.1% to R1.1 billion and the group operating margin was 
30 basis points lower at 6.3% as a result of the faster growth rate in the lower 
margin UPD business. 

Diluted headline earnings per share grew by 9.2% to 298.6 cents, at the upper end of 
the earnings guidance range provided at the interim results in April. 

The total dividend was increased by 10.5% to 168.0 cents per share.

Group inventory days improved from 63 to 59 days. Inventory levels were managed below 
turnover growth across all brands.

The group remains strongly cash generative with cash inflow from operations increasing 
33% to R1 013 million, mainly through improved management of working capital. During 
the year R748 million was returned to shareholders through dividend payments and 
share buy-backs as part of the group's ongoing commitment to return excess cash to 
shareholders. Capital expenditure of R310 million was R54 million higher than the 
previous year owing mainly to the investment in UPD's infrastructure. 

TRADING PERFORMANCE
Retail sales growth was driven by the 8.6% sales increase in Clicks, with comparable 
store sales growing by 5.8%. Clicks opened a net 22 new stores to extend the 
footprint to 442, with 331 in-store pharmacies. Membership of the Clicks ClubCard 
loyalty programme has grown to 4.1 million. 

Musica continued to gain market share in CDs and DVDs, despite the net closure of 
14 stores. The brand's comparable store sales increased by 5.9%. The Body Shop 
increased turnover by 11.3%, benefiting from the opening of four new stores during 
the year. 

UPD increased turnover by 22.8% and grew its share of the private pharmaceutical 
wholesale market from 24.3% to 26.7%. UPD has become an increasingly significant 
player in the bulk distribution market and now has 20 distribution agency clients. 

PROSPECTS
The group remains focused on delivering excellence in health and beauty retailing and 
healthcare supply management. The current weak consumer spending environment is 
anticipated to continue and trading over the important festive season period will be 
critical to performance in the year ahead. Selling price inflation is expected to be 
4% - 5% for 2014.

The Clicks footprint will be expanded with the planned opening of 25 new stores and 
20 - 25 dispensaries.

Capital expenditure of R338 million has been committed for 2014 for stores and 
pharmacies, IT systems and expanding distribution capacity in UPD. 

FINAL DIVIDEND
The board of directors has approved a final gross ordinary dividend of 119.5 cents 
per share (2012: 107.9 cents per share) and a 16.8 cents per ordinary "A" share 
(2012: 15.2 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 these 
declarations. 

Dividends Tax ("DT") amounting to 17.925 cents per ordinary share and 2.52 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 
101.575 cents net of DT and ordinary "A" shareholders will receive a dividend of 
14.28 cents net of DT. 

The company has 29 153 295 ordinary "A" shares and 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 
final dividends:
Last day to trade "cum" the dividend            Friday, 17 January 2014
Shares trade "ex" the dividend                  Monday, 20 January 2014
Record date                                     Friday, 24 January 2014
Payment to shareholders                         Monday, 27 January 2014

Share certificates may not be dematerialised or rematerialised between Monday, 
20 January 2014 and Friday, 24 January 2014, 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, 
17 January 2014, 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

24 October 2013


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
R'000                                             Year to       Year to
                                                31 August     31 August
                                                     2013          2012             %
                                               (reviewed)     (audited)        change
Revenue                                        18 463 420    16 243 377         13.7%
Turnover                                       17 543 301    15 436 947         13.6%
Cost of merchandise sold                     (13 760 770)  (11 961 536)         15.0%
Gross profit                                    3 782 531     3 475 411          8.8%
Other income                                      913 431       800 554         14.1%
Total income                                    4 695 962     4 275 965          9.8%
Expenses                                      (3 592 109)   (3 264 637)         10.0%
   Depreciation and amortisation                (200 398)     (171 535)         16.8%
   Occupancy costs                              (500 992)     (471 897)          6.2%
   Employment costs                           (1 789 428)   (1 582 459)         13.1%
   Other costs                                (1 101 291)   (1 038 746)          6.0%
Operating profit                                1 103 853     1 011 328          9.1%
Loss on disposal of property, plant 
and equipment                                     (7 854)       (6 578)         19.4%
Profit before financing costs                   1 095 999     1 004 750          9.1%
Net financing costs                              (45 216)      (46 396)        (2.5%)
   Financial income                                 6 688         5 876         13.8%
   Financial expense                             (51 904)      (52 272)        (0.7%)
Profit before taxation                          1 050 783       958 354          9.6%
Income tax expense                              (299 215)     (269 974)         10.8%
Profit for the year                               751 568       688 380          9.2%
Other comprehensive income:
Items that may be subsequently reclassified 
to profit or loss
   Exchange differences on translation of 
   foreign subsidiaries                             2 009         1 615
   Cash flow hedges                                 9 952         1 485
   Change in fair value of effective portion       13 822         2 063
   Deferred tax on movement of effective portion  (3 870)         (578)
Other comprehensive income for the year, 
net of tax                                         11 961         3 100
Total comprehensive income for the year           763 529       691 480
Profit/(loss) attributable to:
   Equity holders of the parent                   751 171       688 687
   Non-controlling interest                           397         (307)
                                                  751 568       688 380
Total comprehensive income attributable to:
   Equity holders of the parent                   763 132       691 787
   Non-controlling interest                           397         (307)
                                                  763 529       691 480
Earnings per share (cents)                          300.1         272.0         10.3%
Diluted earnings per share (cents)                  296.4         271.9          9.0%

HEADLINE EARNINGS RECONCILIATION
R'000                                             Year to       Year to
                                                31 August     31 August
                                                     2013          2012             %
                                               (reviewed)     (audited)        change
Total profit for the year attributable to 
equity holders of the parent                      751 171       688 687
Adjusted for:                              
   Loss on disposal of property, plant 
   and equipment                                    5 655         4 736
   Insurance recovery income                            -       (1 018)
Headline earnings                                 756 826       692 405          9.3%
Headline earnings per share (cents)                 302.4         273.5         10.6%
Diluted headline earnings per share (cents)         298.6         273.4          9.2%


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R'000                                                             As at         As at
                                                              31 August     31 August
                                                                   2013          2012
                                                             (reviewed)     (audited)
Non-current assets                                            1 582 698     1 490 348
   Property, plant and equipment                              1 058 967     1 010 657
   Intangible assets                                            349 018       306 286
   Goodwill                                                     103 510       103 510
   Deferred tax assets                                           59 098        57 401
   Loans receivable                                              12 105        12 494
Current assets                                                3 866 710     3 286 064
   Inventories                                                2 225 372     2 080 375
   Trade and other receivables                                1 507 766     1 171 541
   Loans receivable                                                   -         3 710
   Cash and cash equivalents                                    115 559        25 451
   Derivative financial assets                                   18 013         4 987
Total assets                                                  5 449 408     4 776 412
Equity and liabilities
Total equity                                                  1 376 838     1 348 904
Non-current liabilities                                         252 305       286 601
   Employee benefits                                             91 489       105 989
   Deferred tax liabilities                                       9 208        39 555
   Operating lease liability                                    151 608       141 057
Current liabilities                                           3 820 265     3 140 907
   Trade and other payables                                   3 260 197     2 768 759
   Employee benefits                                            148 402       109 861
   Provisions                                                     6 596         8 828
   Interest-bearing borrowings                                  344 355       214 566
   Income tax payable                                            58 605        37 536
   Derivative financial liabilities                               2 110         1 357
Total equity and liabilities                                  5 449 408     4 776 412


CONSOLIDATED STATEMENT OF CASH FLOWS
R'000                                                           Year to       Year to
                                                              31 August     31 August
                                                                   2013          2012
                                                             (reviewed)     (audited)
Operating profit before working capital changes               1 350 885     1 235 114
Working capital changes                                          25 718     (161 586)
Net interest paid                                              (35 141)      (33 465)
Taxation paid                                                 (328 647)     (276 458)
Cash inflow from operating activities before dividends        1 012 815       763 605
Dividends paid to shareholders                                (394 005)     (337 285)
Net cash effects from operating activities                      618 810       426 320
Net cash effects from investing activities                    (304 491)     (247 949)
   Capital expenditure                                        (309 886)     (255 789)
   Other investing activities                                     5 395         7 840
Net cash effects from financing activities                    (224 211)     (170 710)
   Purchase of treasury shares                                (354 158)      (12 013)
   Other financing activities                                   129 947     (158 697)
Net increase in cash and cash equivalents                        90 108         7 661
Cash and cash equivalents at the beginning of the year           25 451        17 790
Cash and cash equivalents at the end of the year                115 559        25 451


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R'000                                                           Year to       Year to
                                                              31 August     31 August
                                                                   2013          2012
                                                             (reviewed)     (audited)
Opening balance                                               1 348 904       965 187
Purchase of treasury shares                                   (354 158)      (12 013)
Disposal of treasury shares                                         158         1 973
Dividends paid to shareholders                                (394 005)     (337 285)
Withholding tax on dividend*                                   (11 234)             -
Total comprehensive income for the year                         763 529       691 480
Share-based payment reserve movement                             23 644        39 562
Total                                                         1 376 838     1 348 904
Dividend per share (cents)
   Interim paid                                                    48.5          44.1
   Final declared/paid                                            119.5         107.9
                                                                  168.0         152.0
* Refer to note 1.3


SEGMENTAL ANALYSIS
The group's reportable segments under IFRS 8 are Retail and Distribution.
R'000                                  Profit
                                       before        Total      Capital         Total
                          Turnover   taxation       assets  expenditure   liabilities
Year to 31 August 2013
Retail                  12 292 106    906 599    2 857 864      209 523     1 913 513
Distribution             7 710 270    194 947    2 914 778       56 059     2 294 975
Inter-segmental        (2 459 075)      2 307  (1 161 928)            -   (1 155 097)
Total reportable 
segmental balance       17 543 301  1 103 853    4 610 714      265 582     3 053 391
Non-reportable 
segmental balance                -   (53 070)      838 694       44 304     1 019 179
Total group balance     17 543 301  1 050 783    5 449 408      309 886     4 072 570
Year to 31 August 2012 
(restated)*
Retail                  11 395 623    852 646    2 641 082      190 355     1 581 972
Distribution             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

                                                                  As at         As at
                                                              31 August     31 August
                                                                   2013          2012
                                                             (reviewed)     (audited)
Non-reportable segmental profit before taxation consists of:
Loss on disposal of property, plant and equipment               (7 854)       (6 578)
Financial income                                                  6 688         5 876
Financial expense                                              (51 904)      (52 272)
                                                               (53 070)      (52 974)
* Refer to note 1.2


SUPPLEMENTARY INFORMATION
                                                                  As at         As at
                                                              31 August     31 August
                                                                   2013          2012
                                                             (reviewed)     (audited)
Number of ordinary shares in issue (gross) ('000)               268 323       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
Number of ordinary shares in issue 
(net of treasury shares) ('000)                                 246 880       253 042
Weighted average number of shares in issue 
(net of treasury shares) ('000)                                 250 297       253 154
Weighted average diluted number of shares in issue 
(net of treasury shares) ('000)                                 253 434       253 258
Number of ordinary shares purchased ('000)                        6 187           217
Net asset value per share (cents)                                   558           533
Net tangible asset value per share (cents)                          374           371
Depreciation and amortisation (R'000)                           210 105       181 102
Capital expenditure (R'000)                                     309 886       255 789
Capital commitments (R'000)                                     337 850       355 700


NOTES
Accounting policies
1.1  These annual financial results for the year ended 31 August 2013 have been 
     prepared in compliance with International Financial Reporting Standards ("IFRS"),
     the SAICA Financial Reporting Guides as issued by the Accounting Practices 
     Committee and Financial Pronouncements as issued by the Financial Reporting 
     Council, 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 financial results for the year 
     ended 31 August 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 change in segmental disclosure due to the change in reporting lines as 
     detailed in note 1.2 below together with the standards and amendments that became
     effective on 1 January 2012 and 1 July 2012: 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.

     Ernst & Young Inc., the group's independent auditor has reviewed the preliminary
     condensed consolidated financial statements contained in this preliminary report 
     and has expressed an unmodified conclusion on the preliminary condensed 
     consolidated financial statements. Their review report is available for inspection
     at the company's registered office. These condensed financial statements have been 
     prepared under the supervision of Mr M Fleming CA(SA), the Chief Financial Officer
     of the group.

1.2  The segmental analysis for the year to 31 August 2013 has been consolidated due 
     to a change in the composition of its reportable segments. Clicks, Musica and 
     Body Shop are reported as part of the Retail reportable segment. In addition, in 
     the current financial year Clicks Direct Medicines has been included in the 
     Distribution business which now comprises UPD and Clicks Direct Medicines. 
     This change was made due to a change in management reporting lines as the 
     business has been incorporated within the Distribution business. In the prior 
     year, the business was reported as part of Retail. This has resulted in a decrease
     in total assets in Retail of R47.4 million, a decrease in total liabilities of 
     R35.8 million and a decrease in operating profit of R1.9 million for 2012. Within 
     Distribution, total assets increased by R21.2 million, total liabilities increased
     by R9.6 million and operating profit increased by R1.9 million for 2012.

1.3  Relating to retrospective withholding tax on 2012 interim dividend.


Registered address: Cnr Searle and Pontac Streets, Cape Town 8001. PO Box 5142, 
Cape Town 8000
Directors: DM Nurek* (Chairman), F Abrahams*, JA Bester*, BD Engelbrecht, 
M Fleming (Chief Financial Officer), F Jakoet*, DA Kneale# (Chief Executive Officer), 
NS Matlala*, M Rosen*  * Independent non-executive # British
Registration number: 1996/000645/06
Income tax number: 9061/745/71/8 
Share code: CLS
ISIN: ZAE000134854
CUSIP: 18682W205
Transfer secretaries: Computershare Investor Services Proprietary Limited 
70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107
Sponsor: Investec Bank Limited
www.clicksgroup.co.za


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