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Preliminary reviewed condensed consolidated results for the year ended 31 August 2014
CLICKS GROUP LIMITED
Registration number: 1996/000645/06
Share code: CLS
ISIN: ZAE000134854
CUSIP: 18682W205
PRELIMINARY REVIEWED CONDENSED CONSOLIDATED RESULTS
for the year ended 31 August 2014
Group turnover up 9.2%
Diluted headline EPS up 12.9%
Total dividend up 13.1%
Return on equity up to 57.0%
COMMENTARY
OVERVIEW
Clicks Group delivered a good trading performance in an environment of continued
economic pressure and fragile consumer confidence. The brands have strengthened their
market positions, supported by the comparative resilience of the health and beauty
markets.
The group has remained highly cash-generative, invested a record R337 million in
capital expenditure for future growth and returned over R700 million to shareholders
in dividends and share buy-backs.
The group's sector-leading return on equity increased from 55.5% to 57.0%.
FINANCIAL PERFORMANCE
Group turnover increased by 9.2% to R19.1 billion, with retail sales growing by 8.8%
and UPD by 11.1%. Selling price inflation was contained to 3.2% for the period.
Total income increased by 10.2% and the total income margin expanded by 20 basis points
to 27.0% through well-managed buying and promotional campaigns, and growth in private
label sales in Clicks.
Operating expenses in retail were 10.1% higher due to the increased investment in
stores and staff. Comparable retail cost growth was contained below sales growth at
5.0%. UPD expenses increased by 10.3%. Following the investment in wholesale automation
and distribution warehouse capacity, cost growth moderated in the second half as
expected and was contained at 8.4%.
Operating profit grew by 10.3% to R1.2 billion as the group operating margin increased
by 10 basis points to 6.4%. Both retail and distribution businesses improved margin
by 10 basis points.
Diluted headline earnings per share (HEPS) increased by 12.9% to 336.8 cents. The
total dividend was increased by 13.1% to 190 cents per share, based on a dividend
cover ratio of 1.8 times. Diluted HEPS has shown a compound annual growth rate of
15.2% since 2009, while dividends per share have increased at a compound rate of 17.7%
over the same period.
Inventory days in stock moved from 59 to 64 days. Inventory levels were 17.5% higher
at year-end as Clicks focused on increasing product availability and UPD increased
stock levels ahead of the anticipated growth in its preferred supply chain partner
contract.
Cash inflow from operations increased by R144 million to R1.5 billion. The group
returned R714 million to shareholders through dividend payments and share buy-backs
in line with the policy of returning surplus cash to shareholders.
TRADING PERFORMANCE
The Clicks chain increased sales by 9.3% following a stronger second half performance
which saw sales grow by 10.6%. This was driven mainly by volume gains through an
effective promotional strategy and price competitiveness. Clicks extended its store
footprint to 464, with 339 dispensaries and 139 clinics. The Clicks ClubCard loyalty
programme has grown active membership to 4.7 million.
The Body Shop posted an improved result for the second six months and increased
turnover for the year by 8.5%. Musica grew sales by 1.4% and continued to gain share
in all its product categories.
Turnover in UPD increased by 11.1%. UPD has grown its share of the private
pharmaceutical wholesale market from 24.5% to 25.2%. The expansion of the distribution
facility in Johannesburg has increased warehouse capacity by 50%.
OUTLOOK
The current consumer environment is not expected to change significantly in the year
ahead.
The businesses will continue to focus on the effective delivery of their strategies.
Clicks plans to expand its retail presence by opening 20 - 25 stores and pharmacies.
UPD aims to gain further market share in pharmaceutical wholesale.
Management remains confident in the group's ability to continue to grow market share
and generate cash. The board of directors have resolved to reduce the dividend cover
to 1.7 times commencing with the 2015 interim dividend. Capital expenditure of
R370 million has been committed for 2015, mainly for stores and pharmacies, and
IT systems.
FINAL DIVIDEND
The board of directors have approved a final gross ordinary dividend of 136.5 cents
per share (2013: 119.5 cents per share) and a 19.0 cents per ordinary "A" share
(2013: 16.8 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 20.475 cents per ordinary share and 2.85 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
116.025 cents net of DT and ordinary "A" shareholders will receive a dividend of
16.15 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 final dividend:
Last day to trade "cum" the dividend Friday, 16 January 2015
Shares trade "ex" the dividend Monday, 19 January 2015
Record date Friday, 23 January 2015
Payment to shareholders Monday, 26 January 2015
Share certificates may not be dematerialised or rematerialised between Monday,
19 January 2015 and Friday, 23 January 2015, both days inclusive.
The board of directors 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, 16 January 2015,
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
23 October 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
R'000 Year to
Year to 31 August
31 August 2013 %
2014 (restated) change
Revenue 20 203 300 18 460 571 9.4
Turnover 19 149 524 17 543 301 9.2
Cost of merchandise sold (15 026 159) (13 760 770) 9.2
Gross profit 4 123 365 3 782 531 9.0
Other income 1 048 279 911 735 15.0
Total income 5 171 644 4 694 266 10.2
Expenses (3 953 943) (3 590 481) 10.1
Depreciation and amortisation (219 871) (200 398) 9.7
Occupancy costs (564 469) (500 992) 12.7
Employment costs (2 033 605) (1 790 649) 13.6
Other costs (1 135 998) (1 098 442) 3.4
Operating profit 1 217 701 1 103 785 10.3
Profit/(loss) on disposal of property,
plant and equipment 29 687 (7 854)
Profit before financing costs 1 247 388 1 095 931 13.8
Net financing costs (40 660) (46 369) (12.3)
Financial income 5 497 5 535 (0.7)
Financial expense (46 157) (51 904) (11.1)
Profit before taxation 1 206 728 1 049 562 15.0
Income tax expense (341 883) (298 873) 14.4
Profit for the year 864 845 750 689 15.2
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 (236) 2 009
Cash flow hedges (11 584) 9 952
Change in fair value of effective portion (16 087) 13 822
Deferred tax on movement of effective portion 4 503 (3 870)
Other comprehensive (loss)/income for the year,
net of tax (11 820) 12 840
Total comprehensive income for the year 853 025 763 529
Profit attributable to:
Equity holders of the parent 864 612 750 292
Non-controlling interest 233 397
864 845 750 689
Total comprehensive income attributable to:
Equity holders of the parent 852 792 763 132
Non-controlling interest 233 397
853 025 763 529
Earnings per share (cents) 352.4 299.8 17.5
Diluted earnings per share (cents) 347.4 296.1 17.3
HEADLINE EARNINGS RECONCILIATION
R'000 Year to
Year to 31 August
31 August 2013 %
2014 (restated) change
Total profit for the year attributable to
equity holders of the parent 864 612 750 292
Adjusted for:
(Profit)/loss on disposal of property,
plant and equipment (26 250) 5 655
Headline earnings 838 362 755 947 10.9
Headline earnings per share (cents) 341.7 302.0 13.1
Diluted headline earnings per share (cents) 336.8 298.3 12.9
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R'000 As at
As at 31 August
31 August 2013
2014 (restated)
Non-current assets 1 771 636 1 601 461
Property, plant and equipment 1 135 007 1 058 967
Intangible assets 371 623 349 018
Goodwill 103 510 103 510
Deferred tax assets 126 335 59 098
Loans receivable 12 540 12 105
Financial assets at fair value through profit and loss 22 621 18 763
Current assets 4 420 621 3 843 317
Inventories 2 614 196 2 225 372
Trade and other receivables 1 607 659 1 507 766
Cash and cash equivalents 195 631 92 166
Derivative financial assets 3 135 18 013
Total assets 6 192 257 5 444 778
Equity and liabilities
Total equity 1 566 973 1 376 838
Non-current liabilities 286 465 252 305
Employee benefits 115 336 91 489
Deferred tax liabilities 2 782 9 208
Operating lease liability 168 347 151 608
Current liabilities 4 338 819 3 815 635
Trade and other payables 4 041 261 3 255 567
Employee benefits 190 494 148 402
Provisions 9 882 6 596
Interest-bearing borrowings - 344 355
Income tax payable 94 342 58 605
Derivative financial liabilities 2 840 2 110
Total equity and liabilities 6 192 257 5 444 778
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
R'000 Year to
Year to 31 August
31 August 2013
2014 (restated)
Operating profit before working capital changes 1 490 840 1 346 850
Working capital changes 354 925 25 824
Net interest paid (30 978) (36 294)
Taxation paid (350 204) (328 647)
Cash inflow from operating activities before dividends 1 464 583 1 007 733
Dividends paid to shareholders (429 277) (394 005)
Net cash effects from operating activities 1 035 306 613 728
Net cash effects from investing activities (299 096) (304 491)
Capital expenditure (336 854) (309 886)
Other investing activities 37 758 5 395
Net cash effects from financing activities (632 745) (224 211)
Purchase of treasury shares (285 146) (354 158)
Treasury share cancellation costs (3 244) -
Other financing activities (344 355) 129 947
Net increase in cash and cash equivalents 103 465 85 026
Cash and cash equivalents at the beginning of the year 92 166 7 140
Cash and cash equivalents at the end of the year 195 631 92 166
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R'000 Year to
Year to 31 August
31 August 2013
2014 (restated)
Opening balance 1 376 838 1 348 904
Purchase of treasury shares (285 146) (354 158)
Treasury share cancellation costs (3 244) -
Disposal of treasury shares - 158
Dividends paid to shareholders (429 277) (394 005)
Withholding tax on dividend - (11 234)
Total comprehensive income for the year 853 025 763 529
Share-based payment reserve movement 55 542 23 644
Acquisition of non-controlling interest (765) -
Total 1 566 973 1 376 838
Dividend per share (cents)
Interim paid 53.5 48.5
Final declared/paid 136.5 119.5
190.0 168.0
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
Twelve months to
31 August 2014
Retail 13 369 083 1 000 119 3 070 544 234 844 2 390 715
Distribution 8 563 104 220 960 3 492 247 47 041 2 667 547
Inter-segmental (2 782 663) (3 378) (1 347 924) - (1 337 715)
Total reportable
segmental balance 19 149 524 1 217 701 5 214 867 281 885 3 720 547
Non-reportable
segmental balance - (10 973) 977 390 54 969 904 737
Total group balance 19 149 524 1 206 728 6 192 257 336 854 4 625 284
Twelve months 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 Year to
Year to 31 August
31 August 2013
2014 (restated)
Non-reportable segmental profit before taxation consists of:
Profit/(loss) on disposal of property, plant and equipment 29 687 (7 854)
Financial income 5 497 5 535
Financial expense (46 157) (51 904)
(10 973) (54 223)
SUPPLEMENTARY INFORMATION
As at
As at 31 August
31 August 2013
2014 (restated)
Number of ordinary shares in issue (gross) ('000) 246 138 268 323
Number of ordinary shares in issue including
"A" shares issued in terms of employee share
ownership programme (gross) ('000) 275 291 297 477
Number of ordinary shares in issue (net of
treasury shares) ('000) 242 260 246 880
Weighted average number of shares in issue
(net of treasury shares) ('000) 245 364 250 297
Weighted average diluted number of shares in issue
(net of treasury shares) ('000) 248 892 253 434
Number of ordinary shares purchased ('000) 4 620 6 187
Net asset value per share (cents) 647 558
Net tangible asset value per share (cents) 451 374
Depreciation and amortisation (R'000) 229 703 210 105
Capital expenditure (R'000) 336 854 309 886
Capital commitments (R'000) 369 700 337 850
NOTES
Accounting policies
1.1 These condensed consolidated financial statements for the year ended 31 August 2014
have been prepared in accordance with the requirements of the JSE Limited Listings
Requirements for preliminary reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require preliminary reports to be prepared
in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards ("IFRS") and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Pronouncements as issued by the Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 -
Interim Financial Reporting.
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.
The accounting policies used in the preparation of the financial results for the
year ended 31 August 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 of R0.3 million has also been
reclassified to other comprehensive income.
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 year ended 31 August 2013 has been
to reduce other income by R1.7 million (2012: R1.5 million), to increase net
financing costs by R1.2 million (2012: R1.0 million) and to reduce other costs by
R2.8 million (2012: R2.5 million). The impact on the statement of financial position
as at 31 August 2013 has been to recognise a financial asset at fair value through
profit or loss of R18.8 million (2012: R14.8 million), to reduce cash and cash
equivalents by R23.4 million (2012: R18.3 million) and to reduce trade and other
payables by R4.6 million (2012: R3.5 million).
1.4 The effect on the financial statements of the above restatements is as follows:
R'000 Year to Year to
31 August 31 August
2013 2012
(restated) (restated)
(Decrease)/increase in operating profit (68) 996
Increase in financing costs (1 153) (996)
Decrease in income tax expense 342 -
Increase in other comprehensive income 879 -
Increase in financial assets at fair value through
profit or loss 18 763 14 771
Decrease in cash and cash equivalents (23 393) (18 311)
Decrease in trade and other payables (4 630) (3 540)
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) -
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: 23/10/2014 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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