Wrap Text
Preliminary Reviewed Condensed Consolidated Results for the year ended 31 August 2016
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 2016
Retail turnover up 12.8%
Diluted headline EPS up 14.2%
Total dividend up 15.7%
Return on equity of 49.2%
COMMENTARY
OVERVIEW
The group's retail businesses, in particular Clicks, delivered another strong trading
performance in 2016 as all brands strengthened their competitive positions and
reported market share gains.
The performance for the year translated into a 14.2% increase in diluted headline
earnings per share to 438.5 cents while the group again delivered a high return on
equity of 49.2%.
The total dividend was increased by 15.7% to 272.0 cents per share and together with
the growth in the Clicks Group share price over the past year represents a total
shareholder return of 35.3%.
FINANCIAL PERFORMANCE
Group turnover increased by 9.5% to R24.2 billion. Retail sales rose by 12.8%, with
same store sales increasing 9.8%. Distribution turnover increased by 6.1%. Selling
price inflation for the group was contained to 4.9%.
Total income increased by 11.0% and the group's total income margin improved by 30 basis
points to 26.3% owing to the favourable mix impact with the faster growth in retail.
The increase in retail operating expenses of 11.2% was contained below sales growth
despite the investment in new stores, pharmacies and customer service. Comparable
retail costs increased by 6.4%. UPD demonstrated excellent cost control in a difficult
market and restricted expense growth to 7.4%.
Operating profit grew by 12.6% to R1.6 billion as both retail and distribution maintained
margin in the challenging trading conditions. The group's operating margin increased
by 20 basis points to 6.5%, benefiting from the stronger retail growth.
Inventory days in stock improved from 68 to 66 days.
Cash inflow from operations before working capital changes increased by 8.7% to
R1.85 billion. As part of the board's commitment to return surplus cash to shareholders,
the group returned R876 million to shareholders through dividend payments of
R586 million and share buy-backs of R290 million.
Capital expenditure of R433 million was invested in new stores and pharmacies,
refurbishments, IT systems and UPD infrastructure and warehousing.
TRADING PERFORMANCE
Retail health and beauty sales, including Clicks and the franchise brands of
The Body Shop, GNC and Claire's, increased by 13.5%, with strong growth across all
product categories.
The Clicks store footprint was expanded to 511 following the opening of a net 25 new
stores and the pharmacy network reached 400 as 39 in-store pharmacies were opened
during the year. Clicks launched an online sales platform which offers a "click and
collect" facility in all stores across South Africa.
Clicks ClubCard membership increased by over one million to reach 6.2 million after
the successful relaunch of the loyalty programme.
The group has made a considerable investment in improving the quality of customer
service in store and created over 1 200 new jobs in the past year.
UPD experienced a tough year and grew turnover by 6.1% in a pharmaceutical market
which has shown minimal volume growth. In addition, the regulated single exit price
(SEP) increase in 2016 was lower than the previous year. Despite these pressures UPD
maintained its operating profit margin by driving efficiencies and through good cost
management.
OUTLOOK
The weak consumer spending environment is expected to continue into 2017 as low economic
growth, together with ongoing political and social uncertainty, will place further
financial pressure on consumers.
The core health and beauty markets, as well as the group's business model, are resilient
and the business will trade through this tough environment by focusing on providing
value to customers and managing costs efficiently.
Clicks has strong organic growth prospects for the medium to long term, with extensive
opportunities to expand its store footprint in South Africa.
Record levels of capital expenditure of R577 million will be invested in stores, IT and
supply chain to support the growth in the business.
Management is confident of the group's ability to sustain performance and deliver on
its medium-term financial and operating targets.
FINAL DIVIDEND
The board of directors has approved a final gross ordinary dividend of 196.0 cents per
share (2015: 169.5 cents per share) and a 27.2 cents per ordinary "A" share (2015:
23.5 cents per share). The source of the dividend will be from distributable reserves
and paid in cash.
Additional information
Dividends Tax (DT) amounting to 29.40 cents per ordinary share and 4.08 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
166.60 cents net of DT and ordinary "A" shareholders will receive a dividend of
23.12 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 Tuesday, 24 January 2017
Shares trade "ex" the dividend Wednesday, 25 January 2017
Record date Friday, 27 January 2017
Payment to shareholders Monday, 30 January 2017
Share certificates may not be dematerialised or rematerialised between Wednesday,
25 January 2017 and Friday, 27 January 2017, 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 Tuesday, 24 January 2017,
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
Annalize Barnard
Acting company secretary
27 October 2016
This annual results announcement, together with the investor presentation and additional
financial information, is available at www.clicksgroup.co.za
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
R'000 Year to Year to
31 August 31 August %
2016 2015 change
Revenue 25 530 967 23 285 096 9.6
Turnover 24 170 879 22 070 092 9.5
Cost of merchandise sold (19 156 612) (17 545 318) 9.2
Gross profit 5 014 267 4 524 774 10.8
Other income 1 353 833 1 210 082 11.9
Total income 6 368 100 5 734 856 11.0
Expenses (4 796 464) (4 338 817) 10.5
Depreciation and amortisation (252 662) (237 670) 6.3
Occupancy costs (682 827) (619 023) 10.3
Employment costs (2 550 731) (2 255 417) 13.1
Other costs (1 310 244) (1 226 707) 6.8
Operating profit 1 571 636 1 396 039 12.6
Loss on disposal of property,
plant and equipment (6 388) (9 446)
Profit before financing costs 1 565 248 1 386 593 12.9
Net financing costs (52 851) (57 309) (7.8)
Financial income 6 255 4 922 27.1
Financial expense (59 106) (62 231) (5.0)
Share of profit of an associate 2 254 - 100.0
Profit before taxation 1 514 651 1 329 284 13.9
Income tax expense (420 779) (374 709) 12.3
Profit for the year 1 093 872 954 575 14.6
Other comprehensive (loss)/income:
Items that will not be subsequently
reclassified to profit or loss - 765
Remeasurement of post-employment
benefit obligations - 1 063
Deferred tax on remeasurement - (298)
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation of
foreign subsidiaries (526) 4 777
Cash flow hedges (6 580) 33 238
Change in fair value of effective portion (9 139) 46 164
Deferred tax on movement of effective portion 2 559 (12 926)
Other comprehensive (loss)/income for the year,
net of tax (7 106) 38 780
Total comprehensive income for the year 1 086 766 993 355
Earnings per share (cents) 460.5 396.7 16.1
Diluted earnings per share (cents) 436.7 381.5 14.5
HEADLINE EARNINGS RECONCILIATION
R'000 Year to Year to
31 August 31 August %
2016 2015 change
Total profit for the year 1 093 872 954 575
Adjusted for:
Loss net of tax on disposal of property,
plant and equipment 4 599 6 801
Insurance recovery income net of tax on
property, plant and equipment - (921)
Headline earnings 1 098 471 960 455 14.4
Headline earnings per share (cents) 462.4 399.2 15.8
Diluted headline earnings per share (cents) 438.5 383.9 14.2
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R'000 As at As at
31 August 31 August
2016 2015
Non-current assets 2 507 207 2 009 163
Property, plant and equipment 1 345 024 1 221 658
Intangible assets 434 083 395 625
Goodwill 103 510 103 510
Deferred tax assets 347 400 177 037
Investment in associate 20 282 -
Loans receivable 9 521 13 003
Financial assets at fair value through profit or loss 16 145 16 668
Derivative financial assets 231 242 81 662
Current assets 5 869 689 5 546 775
Inventories 3 478 717 3 249 914
Trade and other receivables 2 012 696 1 871 616
Loans receivable 8 476 -
Cash and cash equivalents 369 800 400 738
Derivative financial assets - 24 507
Total assets 8 376 896 7 555 938
Equity and liabilities
Total equity 2 452 241 2 012 807
Non-current liabilities 405 541 308 503
Employee benefits 215 132 128 035
Operating lease liability 190 409 180 468
Current liabilities 5 519 114 5 234 628
Trade and other payables 5 148 411 4 898 114
Employee benefits 241 986 214 943
Provisions 6 939 5 745
Income tax payable 92 476 115 826
Derivative financial liabilities 26 971 -
Financial liability at fair value through profit or loss 2 331 -
Total equity and liabilities 8 376 896 7 555 938
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
R'000 Year to Year to
31 August 31 August
2016 2015
Operating profit before working capital changes 1 846 993 1 699 743
Working capital changes (19 467) (15 451)
Net interest paid (38 831) (39 025)
Taxation paid (443 793) (355 520)
Cash inflow from operating activities before dividends paid 1 344 902 1 289 747
Dividends paid to shareholders (585 757) (490 758)
Net cash effects from operating activities 759 145 798 989
Net cash effects from investing activities (454 765) (369 381)
Capital expenditure (432 959) (369 547)
Other investing activities (21 806) 166
Net cash effects from financing activities (335 318) (224 501)
Purchase of treasury shares (290 171) (176 264)
Acquisition of derivative financial assets (45 147) (48 237)
Net (decrease)/increase in cash and cash equivalents (30 938) 205 107
Cash and cash equivalents at the beginning of the year 400 738 195 631
Cash and cash equivalents at the end of the year 369 800 400 738
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R'000 Year to Year to
31 August 31 August
2016 2015
Opening balance 2 012 807 1 566 973
Purchase of treasury shares (290 171) (176 264)
Dividends paid to shareholders (585 757) (490 758)
Total comprehensive income for the year 1 086 766 993 355
Share-based payment reserve movement 228 596 119 501
Total 2 452 241 2 012 807
Dividend per share (cents)
Interim paid 76.0 65.5
Final declared/paid 196.0 169.5
272.0 235.0
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 2016
Retail 16 640 227 1 305 687 3 937 799 323 243 2 605 804
Distribution 11 054 959 276 005 5 177 762 34 286 3 900 597
Inter-segmental (3 524 307) (10 056) (2 425 935) - (2 390 519)
Total reportable
segmental balance 24 170 879 1 571 636 6 689 626 357 529 4 115 882
Non-reportable
segmental balance - (56 985) 1 687 270 75 430 1 808 773
Total group balance 24 170 879 1 514 651 8 376 896 432 959 5 924 655
Twelve months to
31 August 2015
Retail 14 757 724 1 150 684 3 475 535 280 322 2 386 819
Distribution 10 415 301 258 578 4 698 119 27 758 3 635 137
Inter-segmental (3 102 933) (13 223) (1 973 273) - (1 947 914)
Total reportable
segmental balance 22 070 092 1 396 039 6 200 381 308 080 4 074 042
Non-reportable
segmental balance - (66 755) 1 355 557 61 467 1 469 089
Total group balance 22 070 092 1 329 284 7 555 938 369 547 5 543 131
R'000 Year to Year to
31 August 31 August
2016 2015
Non-reportable segmental profit before taxation consists of:
Loss on disposal of property, plant and equipment (6 388) (9 446)
Financial income 6 255 4 922
Financial expense (59 106) (62 231)
Share of profit of an associate 2 254 -
(56 985) (66 755)
SUPPLEMENTARY INFORMATION
As at As at
31 August 31 August
2016 2015
Number of ordinary shares in issue (gross) ('000) 246 138 246 138
Number of ordinary shares in issue including
"A" shares issued in terms of employee share
ownership programme (gross) ('000) 275 291 275 291
Number of ordinary shares in issue
(net of treasury shares) ('000) 236 524 239 884
Weighted average number of shares in issue
(net of treasury shares) ('000) 237 565 240 603
Weighted average diluted number of shares in issue
(net of treasury shares) ('000) 250 501 250 204
Number of ordinary shares repurchased ('000) 3 360 2 376
Net asset value per share (cents) 1 037 839
Net tangible asset value per share (cents) 809 631
Depreciation and amortisation (R'000) 264 144 248 054
Capital expenditure (R'000) 432 959 369 547
Capital commitments (R'000) 577 400 432 300
ACCOUNTING POLICIES AND NOTES
1.1 These condensed consolidated financial statements for the year ended 31 August 2016
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 above and has expressed an
unmodified review conclusion on the preliminary condensed consolidated financial
statements. Their review report is available for inspection at the company's
registered office together with the preliminary condensed consolidated financial
statements identified in the auditor's report. 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 2016 are in terms of IFRS and are consistent with those
applied in the Audited Financial Statements for the year ended 31 August 2015.
1.2 Related party transactions for the current year are similar to those disclosed
in the group's annual financial statements for the year ended 31 August 2015.
No significant related party transactions arose during the current year.
1.3 There were no material business combinations during the period under review.
The only acquisition was a 25% interest in an associate, Sorbet Brands Proprietary
Limited. The contribution of this acquisition to profit for the year has been
presented in the consolidated statement of comprehensive income.
1.4 Under the general authorities granted by shareholders, 3 360 470 shares were
repurchased during the current year.
1.5 The carrying value of all financial instruments approximates fair value. All financial
instruments are held at amortised cost, with the exception of derivative instruments
that are accounted for at fair value through profit or loss. The fair value of
financial instruments that are not traded in active markets are determined by using
valuation techniques; if all significant inputs required to fair value an instrument
are observable, the instrument is included in level 2 and if the significant inputs
required to fair value an instrument are unobservable, the instrument is included
in level 3. The derivative instruments comprise equity derivative hedges which are
calculated using a Monte Carlo option pricing model with reference to the closing
share price, 250-day historical volatility, the 12-month trailing dividend yield
and the risk-free rate; and forward exchange contracts which are calculated using
standard market calculation conventions with reference to the relevant closing
market spot rates, forward foreign exchange rates and interest rates. All financial
instruments accounted for at fair value through profit or loss are considered to
be level 2 investments except for the financial liability relating to the contingent
consideration on the acquisition of an associate which is considered to be a
level 3 liability, and amounts to R2.3 million. There have been no transfers
between levels 1, 2 and 3 during the year.
The majority of the non-current derivative financial assets are to hedge
obligations under the cash-settled share compensation scheme.
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
Acting company secretary: A Barnard
Registration number: 1996/000645/06
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: 27/10/2016 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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