Wrap Text
Interim Financial Results for the six months ended 28 February 2014
CLICKS GROUP LIMITED
Registration number: 1996/000645/06
Share code: CLS
ISIN: ZAE000134854
CUSIP: 18682W205
INTERIM CONDENSED CONSOLIDATED RESULTS
for the six months ended 28 February 2014
Group turnover up 9.6%
Diluted headline EPS up 10.3%
Interim dividend up 10.3%
Return on equity at 55.4%
COMMENTARY
OVERVIEW AND TRADING ENVIRONMENT
Consumer spending in the country has remained constrained over the past six months,
impacting particularly on the middle income segment which is the core target market
of the Clicks chain.
In these demanding trading conditions Clicks is maintaining its competitive position
and continues to show real growth in comparable stores. The brand's strong value
offer is driving sales growth as the health and beauty markets remain resilient.
UPD's integrated wholesale and distribution strategy is working well, reflected in solid
growth in turnover and share gains in both the wholesale and distribution markets.
The group continues to invest for longer-term growth in both its retail and
distribution businesses. In addition the group has signed an exclusive agreement to
launch GNC, a global leader in health and wellness products.
FINANCIAL PERFORMANCE
Group turnover increased by 9.6% to R9.3 billion, with retail sales growing by 7.4%
and UPD by 14.7%. Selling price inflation averaged 3.5% for the period.
Total income increased by 9.1% and the total income margin was 10 basis points lower
at 27.0% as a result of UPD growing at a faster rate than the retail business. The
retail total income margin improved by 40 basis points to 33.4% through private label
margin growth and well-managed promotional campaigns in Clicks.
Operating expenses grew by 9.7%. Retail costs were 9.8% higher owing to the increased
investment in new stores, pharmacies and staff. Comparable retail cost growth was
contained below sales growth at 6.6%. The 12.6% cost growth in UPD reflects the
investments in wholesale automation and distribution warehouse capacity, as well as
additional variable costs relating to distribution contracts secured in the past year.
UPD's cost growth is expected to moderate in the second half of the year.
Operating profit grew by 7.3% and the group operating margin declined by 10 basis
points to 6.1%. The operating margins for the group, and the retail and distribution
segments, are within the targeted ranges despite the investments made in Clicks and
UPD during the current tough trading period.
Diluted headline earnings per share increased by 10.3% to 157.4 cents. An interim
dividend of 53.5 cents per share was declared, an increase of 10.3% over the prior
period.
Inventory days in stock moved from 71 to 75 days. Inventory levels were 15.3% higher
at period-end as both Clicks and UPD invested in stock ahead of supplier price
increases. Inventory levels are expected to normalise during the second half.
Cash inflow from operations at R400 million reflects good working capital and cash flow
management. The group returned R399 million to shareholders through dividend payments
and share repurchases, in line with the policy of returning surplus cash to
shareholders. Capital expenditure of R129 million was incurred in the first half and
the group plans to invest R347 million for the full financial year.
The group's financial and operational performance for the six months has resulted in a
sector-leading return on equity of 55.4%.
TRADING PERFORMANCE
Clicks increased sales by 8.2% with comparable store sales growing by 5.3%. The brand
continued to generate real volume growth, supported by promotional activity which
accounted for 26% of sales in the period. Pharmacy sales were 13.1% higher and Clicks
increased its retail pharmacy market share to 17.6%. Clicks extended its store
footprint to 453, with 333 dispensaries and 133 clinics. The Clicks ClubCard loyalty
programme has grown active membership to 4.3 million.
The Body Shop increased turnover by 7.1% with the brand facing margin pressure from
the depreciation of the Rand. Musica continued to gain share in all product categories
in a declining market.
UPD increased turnover by 14.7%, benefiting from sales to its core customers Clicks
and the private hospital groups, and preferred supply chain partner contracts. UPD has
grown its share of the private pharmaceutical market from 25.7% to 26.3%. The
completion of the new distribution facility in Johannesburg has increased warehouse
capacity by 50%.
OUTLOOK
The current challenging consumer trading environment is expected to continue during
the second half of the financial year, while selling price inflation is anticipated to
average 4% - 5% for the year.
Management plans to improve delivery in Clicks by growing sales through its value
offer, private label, pharmacy and ClubCard. Clicks will also continue to focus on
the prudent management of margin and costs.
UPD aims to extract value from the recent investments in wholesale automation and in
distribution capacity while continuing to extract cost efficiencies across the business.
The group remains on track to achieve its medium-term financial and operating targets.
FULL-YEAR EARNINGS FORECAST
The directors forecast that diluted headline earnings per share for the financial year
ending 31 August 2014 will increase by between 8% and 12% over the 2013 financial year.
The forecast is based on the following key assumptions: Trading conditions will
continue to be challenging as consumer spending remains constrained; selling price
inflation will be relatively low and stable for the year; and the group will continue
to invest for longer-term growth, mainly in new stores and pharmacies.
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 a gross interim ordinary dividend of 53.5 cents
per share (2013: 48.5 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 8.025 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 net dividend of 45.475 cents net of DT.
The company has 246 137 763 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
interim dividend:
Last day to trade "cum" the dividend Friday, 27 June 2014
Shares trade "ex" the dividend Monday, 30 June 2014
Record date Friday, 4 July 2014
Payment to shareholders Monday, 7 July 2014
Share certificates may not be dematerialised or rematerialised between Monday,
30 June 2014 and Friday, 4 July 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,
27 June 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 April 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
R'000 Six months to
Six months to 28 February Year to
28 February 2013 31 August
2014 (restated % 2013
(unaudited) unaudited) change (restated)
Revenue 9 811 411 8 941 276 9.7 18 460 571
Turnover 9 348 825 8 529 084 9.6 17 543 301
Cost of merchandise sold (7 284 418) (6 626 166) 9.9 (13 760 770)
Gross profit 2 064 407 1 902 918 8.5 3 782 531
Other income 459 758 409 839 12.2 911 735
Total income 2 524 165 2 312 757 9.1 4 694 266
Expenses (1 953 569) (1 780 903) 9.7 (3 590 481)
Depreciation and amortisation (107 538) (97 702) 10.1 (200 398)
Occupancy costs (279 017) (247 185) 12.9 (500 992)
Employment costs (1 010 011) (888 089) 13.7 (1 790 649)
Other costs (557 003) (547 927) 1.7 (1 098 442)
Operating profit 570 596 531 854 7.3 1 103 785
Loss on disposal of property,
plant and equipment (3 346) (3 632) (7.9) (7 854)
Profit before financing costs 567 250 528 222 7.4 1 095 931
Net financing costs (22 700) (20 048) 13.2 (46 369)
Financial income 2 828 2 353 20.2 5 535
Financial expense (25 528) (22 401) 14.0 (51 904)
Profit before taxation 544 550 508 174 7.2 1 049 562
Income tax expense (154 665) (144 336) 7.2 (298 873)
Profit for the period 389 885 363 838 7.2 750 689
Other comprehensive (loss)/income:
Items that will not be subsequently
reclassified to profit or loss - - 879
Remeasurement of post-employment
benefit obligations - - 1 221
Deferred tax on remeasurement - - (342)
Items that may be subsequently
reclassified to profit or loss
Exchange differences on translation
of foreign subsidiaries 559 (685) 2 009
Cash flow hedges (3 224) (2 902) 9 952
Change in fair value of
effective portion (4 476) (4 031) 13 822
Deferred tax on movement of
effective portion 1 252 1 129 (3 870)
Other comprehensive (loss)/income
for the period, net of tax (2 665) (3 587) 12 840
Total comprehensive income for
the period 387 220 360 251 763 529
Profit attributable to:
Equity holders of the parent 389 733 363 560 750 292
Non-controlling interest 152 278 397
389 885 363 838 750 689
Total comprehensive income attributable to:
Equity holders of the parent 387 068 359 973 763 132
Non-controlling interest 152 278 397
387 220 360 251 763 529
Earnings per share (cents) 158.5 144.3 9.8 299.8
Diluted earnings per share (cents) 156.5 141.7 10.4 296.1
HEADLINE EARNINGS RECONCILIATION
R'000 Six months to
Six months to 28 February Year to
28 February 2013 31 August
2014 (restated % 2013
(unaudited) unaudited) change (restated)
Total profit for the period
attributable to equity holders
of the parent 389 733 363 560 750 292
Adjusted for:
Loss on disposal of property,
plant and equipment 2 410 2 615 5 655
Headline earnings 392 143 366 175 7.1 755 947
Headline earnings per share (cents) 159.4 145.4 9.6 302.0
Diluted headline earnings per share
(cents) 157.4 142.7 10.3 298.3
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R'000 As at
As at 28 February As at
28 February 2013 31 August
2014 (restated 2013
(unaudited) unaudited) (restated)
Non-current assets 1 614 031 1 553 509 1 601 461
Property, plant and equipment 1 067 116 1 036 047 1 058 967
Intangible assets 353 665 319 911 349 018
Goodwill 103 510 103 510 103 510
Deferred tax assets 55 545 66 298 59 098
Loans receivable 12 306 11 701 12 105
Financial assets at fair value through
profit and loss 21 889 16 042 18 763
Current assets 4 507 873 3 975 944 3 843 317
Inventories 2 894 162 2 509 186 2 225 372
Trade and other receivables 1 441 857 1 430 093 1 507 766
Cash and cash equivalents 162 394 35 705 92 166
Derivative financial assets 9 460 960 18 013
Total assets 6 121 904 5 529 453 5 444 778
Equity and liabilities
Total equity 1 375 890 1 268 919 1 376 838
Non-current liabilities 256 162 270 002 252 305
Employee benefits 90 306 87 032 91 489
Deferred tax liabilities 5 048 36 962 9 208
Operating lease liability 160 808 146 008 151 608
Current liabilities 4 489 852 3 990 532 3 815 635
Trade and other payables 3 761 013 3 242 628 3 255 567
Employee benefits 132 200 109 902 148 402
Provisions 6 188 8 828 6 596
Interest-bearing borrowings 549 700 592 962 344 355
Income tax payable 40 677 35 811 58 605
Derivative financial liabilities 74 401 2 110
Total equity and liabilities 6 121 904 5 529 453 5 444 778
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
R'000 Six months to
Six months to 28 February Year to
28 February 2013 31 August
2014 (restated 2013
(unaudited) unaudited) (restated)
Operating profit before working capital changes 706 991 652 028 1 350 817
Working capital changes (118 914) (234 884) 25 824
Net interest paid (17 602) (14 684) (36 294)
Taxation paid (170 760) (159 923) (328 647)
Cash inflow from operating activities before
dividends 399 715 242 537 1 011 700
Dividends paid to shareholders (298 202) (273 225) (394 005)
Net cash effects from operating activities 101 513 (30 688) 617 695
Net cash effects from investing activities (131 905) (141 536) (308 458)
Capital expenditure (129 024) (145 460) (309 886)
Other investing activities (2 881) 3 924 1 428
Net cash effects from financing activities 100 620 200 789 (224 211)
Purchase of treasury shares (101 481) (177 607) (354 158)
Treasury share cancellation costs (3 244) - -
Other financing activities 205 345 378 396 129 947
Net increase in cash and cash equivalents 70 228 28 565 85 026
Cash and cash equivalents at the beginning of
the period 92 166 7 140 7 140
Cash and cash equivalents at the end of
the period 162 394 35 705 92 166
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R'000 Six months to
Six months to 28 February Year to
28 February 2013 31 August
2014 (restated 2013
(unaudited) unaudited) (restated)
Opening balance 1 376 838 1 348 904 1 348 904
Purchase of treasury shares (101 481) (177 607) (354 158)
Treasury share cancellation costs (3 244) - -
Disposal of treasury shares - - 158
Dividends paid to shareholders (298 202) (273 225) (394 005)
Withholding tax on dividend - (11 234) (11 234)
Total comprehensive income for the period 387 220 360 251 763 529
Share-based payment reserve movement 14 759 21 830 23 644
Total 1 375 890 1 268 919 1 376 838
Dividend per share (cents)
Interim declared/paid 53.5 48.5 48.5
Final paid - - 119.5
53.5 48.5 168.0
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
Six months to
28 February 2014
(unaudited)
Retail 6 633 690 475 563 3 051 176 79 820 1 970 579
Distribution 3 993 195 96 780 3 424 738 27 709 2 713 167
Inter-segmental (1 278 060) (1 747) (1 257 901) - (1 248 753)
Total reportable
segmental balance 9 348 825 570 596 5 218 013 107 529 3 434 993
Non-reportable
segmental balance - (26 046) 903 891 21 495 1 311 021
Total group balance 9 348 825 544 550 6 121 904 129 024 4 746 014
Six months to
28 February 2013
(restated unaudited)
Retail 6 176 489 448 707 2 771 180 96 727 1 670 134
Distribution 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 8 529 084 531 854 4 821 573 121 312 3 211 238
Non-reportable
segmental balance - (23 680) 707 880 24 148 1 049 296
Total group balance 8 529 084 508 174 5 529 453 145 460 4 260 534
Year to 31 August 2013
(restated)
Retail 12 292 106 906 531 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 1 103 785 4 610 714 265 582 3 053 391
Non-reportable
segmental balance - (54 223) 834 064 44 304 1 014 549
Total group balance 17 543 301 1 049 562 5 444 778 309 886 4 067 940
R'000 Six months to
Six months to 28 February Year to
28 February 2013 31 August
2014 (restated 2013
(unaudited) unaudited) (restated)
Non-reportable segmental profit before
taxation consists of:
Loss on disposal of property, plant
and equipment (3 346) (3 632) (7 854)
Financial income 2 828 2 353 5 535
Financial expense (25 528) (22 401) (51 904)
(26 046) (23 680) (54 223)
SUPPLEMENTARY INFORMATION
As at
As at 28 February As at
28 February 2013 31 August
2014 (restated 2013
(unaudited) unaudited) (restated)
Number of ordinary shares in issue (gross)
('000) 246 138 268 323 268 323
Number of ordinary shares in issue including
"A" shares issued in terms of employee share
ownership programme (gross) ('000) 275 291 297 477 297 477
Number of ordinary shares in issue (net of
treasury shares) ('000) 245 032 249 984 246 880
Weighted average number of shares in issue
(net of treasury shares) ('000) 245 958 251 918 250 297
Weighted average diluted number of shares in
issue (net of treasury shares) ('000) 249 074 256 652 253 434
Number of ordinary shares purchased ('000) 1 848 3 058 6 187
Net asset value per share (cents) 562 508 558
Net tangible asset value per share (cents) 375 338 374
Depreciation and amortisation (R'000) 112 436 102 121 210 105
Capital expenditure (R'000) 129 024 145 460 309 886
Capital commitments (R'000) 217 500 189 540 337 850
NOTES
Accounting policies
1.1 These annual financial results for the six months ended 28 February 2014 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 the interim financial results
for the six months ended 28 February 2014, are in terms of IFRS and are consistent
with those applied in the Audited Financial Statements for the year ended
31 August 2013, except for as disclosed below. In terms of IAS 1 "Presentation of
Financial Statements", the relevant comparative information has been restated and
the effect on the financial statements is as follows:
1.2 The adoption of IAS 19 (Revised) - Employee Benefits has resulted in comparative
figures being restated to recognise actuarial gains and losses through other
comprehensive income. The impact of this has been to increase employment costs
in the year to 31 August 2013 by R1.2 million with a consequent increase in
other comprehensive income. The related tax charge has also been reclassified.
There was no impact on the interim financial results for the six months ended
28 February 2013.
1.3 The adoption of IFRS 10 - Consolidated Financial Statements has resulted in
comparative figures being restated in terms of the new definition of control where
a structured entity is no longer deemed to be in the group's control. Previously
the group consolidated its insurance cell investment. As a result of the
implementation of IFRS 10, the net investment in the insurance cell is treated
as a financial asset at fair value through profit or loss. The impact of the
restatement on the statement of comprehensive income for the six months to
28 February 2013 has been to reduce other income by R0.9 million
(31 August 2013: R1.7 million), to increase net financing costs by R0.5 million
(31 August 2013: R1.2 million) and to reduce other costs by R1.3 million
(31 August 2013: R2.8 million). The impact on the statement of financial position
as at 28 February 2013 has been to recognise a financial asset at fair value
through profit or loss of R16.0 million (31 August 2013: R18.8 million), to reduce
cash and cash equivalents by R20.6 million (31 August 2013: R23.4 million) and
to reduce trade and other payables by R4.5 million (31 August 2013: R4.6 million).
1.4 The effect on the financial statements of the above restatements are as follows:
R'000 Six months to
28 February Year to
2013 31 August
(restated 2013
unaudited) (restated)
Increase/(decrease) in operating profit 466 (68)
Increase in financing costs (466) (1 153)
Decrease in income tax expense - 342
Increase in other comprehensive income - 879
Increase in financial assets at fair value through
profit or loss 16 042 18 763
Decrease in cash and cash equivalents (20 579) (23 393)
Decrease in trade and other payables (4 537) (4 630)
Decrease in earnings per share (cents)
Basic - (0.3)
Diluted - (0.3)
Decrease in headline earnings per share (cents)
Basic - (0.4)
Diluted - (0.3)
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.
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*, KDM Warburton^
* Independent non-executive # British ^ Appointed 18 February 2014
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
Date: 24/04/2014 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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