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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