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Interim Condensed Consolidated Results for the six months ended 28 February 2018
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 2018
Group turnover up 10.0%
Health and beauty turnover up 14.3%
Cash from operations R1.1 billion
Diluted HEPS up 14.8%
Interim dividend up 16.5%
COMMENTARY
OVERVIEW
Clicks Group reported another strong health and beauty sales performance in the six months to
February 2018 and produced improved margins, strong cash flows and attractive returns to
shareholders.
Retail health and beauty sales grew by 14.3%, with good volume growth in same stores and market
share gains in all product categories.
UPD, the group's pharmaceutical distributor, also performed well in maintaining its operating margin
and gaining market share.
The group's performance for the half-year resulted in diluted headline earnings per share (HEPS)
increasing by 14.8% to 266.3 cents. The interim dividend was increased by 16.5% to 102.5 cents
per share.
FINANCIAL PERFORMANCE
Group turnover increased by 10.0% to R14.4 billion. Retail sales grew by 13.2% and by 7.2% in
comparable stores, with selling price inflation of only 2.6%. Distribution turnover increased by 8.0%,
with selling price inflation averaging 5.7% for the six months.
Total income grew by 11.7% to R3.9 billion. The group's total income margin improved by 40 basis
points to 27.1% owing to the favourable mix impact from the faster growth of the retail business.
Retail expenses increased by 12.4% as the group has invested in 46 new stores, 34 pharmacies and
space extensions in 24 stores over the past 12 months. Comparable retail costs were up by 6.0%.
UPD costs were again well contained to an increase of only 5.3%.
Operating profit grew by 12.2% to R942 million, with the group operating margin expanding by 10 basis
points to 6.5%.
Working capital continues to be efficiently managed and the group's net working capital improved from
43 to 41 days. Retail stock days were maintained at 81 days and UPD increased from 42 to 43 days.
Cash generated by operations totalled R1.1 billion for the six months. The group returned R559 million
to shareholders in dividends.
Capital expenditure of R269 million was invested in new stores, pharmacies, store refurbishments and
the enabling supply chain and information technology capabilities. A further R435 million capital
investment is planned for the second half.
TRADING PERFORMANCE
Retail health and beauty sales, including Clicks and the franchise brands of The Body Shop, GNC and
Claire's, increased by 14.3%, driven by buoyant Christmas trading, appealing promotional offers and
competitive pricing. Comparable stores sales grew by 8.0%.
Clicks expanded its store footprint to 646 with the opening of a net 24 stores in the past six months.
A net 20 new pharmacies were opened to extend the pharmacy network to 493. Clicks ClubCard increased
active membership to 7.5 million as the loyalty programme attracted close to 950 000 new customers
in the past year.
UPD increased wholesale turnover by 10.9%, with market share growing from 24.6% to 25.9%. UPD's total
managed turnover increased by 6.0% to R8.4 billion.
OUTLOOK
Consumer confidence appears to be improving but it is too early for this to translate into increased
disposable income. Consumer spending is therefore expected to remain constrained for the balance of
the group's financial year.
However, Clicks is anticipated to continue its growth momentum and will be opening 40 new stores
this year, well ahead of the target of 25 to 30 stores.
UPD aims to mitigate the impact of the lower single exit price (SEP) increase through continued tight
cost control and the benefit of four new distribution contracts starting in the second half.
The core health and beauty markets in which the business operates are resilient and the group's
market-leading brands are well positioned to increase market share in the current environment.
FULL-YEAR EARNINGS FORECAST
The directors forecast that diluted HEPS for the financial year ending 31 August 2018 will increase
by between 12% and 17% over the 2017 financial year.
The forecast is based on the following key assumptions:
- the trading environment will remain relatively constrained in the second half of the financial
year; and
- retail selling price inflation is anticipated to average between 2% and 3% for the financial year.
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 an interim gross ordinary dividend for the period ended
28 February 2018 of 102.5 cents per share (2017: 88.0 cents per share). The source of the dividend
will be from distributable reserves and it will be paid in cash.
ADDITIONAL INFORMATION
Dividends Tax (DT) of 20% amounting to 20.5 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
dividend of 82.0 cents net of DT.
The company has 253 948 352 ordinary shares and 14 576 648 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 Tuesday, 26 June 2018
Shares trade "ex" the dividend Wednesday, 27 June 2018
Record date Friday, 29 June 2018
Payment to shareholders Monday, 2 July 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 27 June 2018 and
Friday, 29 June 2018, both days inclusive.
The board of directors has 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, 26 June 2018, 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
Matthew Welz
Company secretary
19 April 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
R'000 Six months to Six months to Year to
28 February 28 February 31 August
2018 2017 % 2017
(unaudited) (unaudited) change (audited)
Revenue 15 241 637 13 800 328 10.4 28 342 607
Turnover 14 432 648 13 125 101 10.0 26 809 101
Cost of merchandise sold (11 320 882) (10 297 945) 9.9 (21 185 124)
Gross profit 3 111 766 2 827 156 10.1 5 623 977
Other income 796 650 671 772 18.6 1 523 005
Total income 3 908 416 3 498 928 11.7 7 146 982
Expenses (2 966 136) (2 658 735) 11.6 (5 333 405)
Depreciation and amortisation (160 500) (137 089) 17.1 (283 227)
Occupancy costs (458 358) (375 846) 22.0 (794 796)
Employment costs (1 545 231) (1 396 524) 10.6 (2 845 838)
Other costs (802 047) (749 276) 7.0 (1 409 544)
Operating profit 942 280 840 193 12.2 1 813 577
Loss on disposal of property, plant
and equipment (112) (2 109) (94.7) (4 868)
Profit before financing costs 942 168 838 084 12.4 1 808 709
Net financing costs (1 129) (27 864) (95.9) (37 337)
Financial income 12 339 3 455 257.1 10 501
Financial expense (13 468) (31 319) (57.0) (47 838)
Profit before earnings from associate 941 039 810 220 16.1 1 771 372
Share of profit of an associate 1 345 1 417 (5.1) 2 900
Profit before taxation 942 384 811 637 16.1 1 774 272
Income tax expense (263 788) (228 886) 15.2 (496 630)
Profit for the period 678 596 582 751 16.4 1 277 642
Other comprehensive loss:
Items that will not be subsequently
reclassified to profit or loss - - 3 236
Remeasurement of post-employment
benefit obligations - - 4 495
Deferred tax on remeasurement - - (1 259)
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation of
foreign subsidiaries (405) (2 853) (6 561)
Cash flow hedges (13 440) (18 653) (13 234)
Change in fair value of effective portion (18 667) (25 907) (17 892)
Deferred tax on movement of effective portion 5 227 7 254 4 658
Other comprehensive loss for the period,
net of tax (13 845) (21 506) (16 559)
Total comprehensive income for the period 664 751 561 245 1 261 083
Earnings per share (cents) 285.5 246.4 15.9 540.2
Diluted earnings per share (cents) 266.3 231.4 15.1 505.7
HEADLINE EARNINGS RECONCILIATION
R'000 Six months to Six months to Year to
28 February 28 February 31 August
2018 2017 % 2017
(unaudited) (unaudited) change (audited)
Total profit for the period 678 596 582 751 1 277 642
Adjusted for:
Loss net of tax on disposal of property,
plant and equipment 81 1 518 3 506
Gain on consolidation of the New Clicks
Foundation Trust (12 596)
Headline earnings 678 677 584 269 16.2 1 268 552
Headline earnings per share (cents) 285.5 247.0 15.6 536.3
Diluted headline earnings per share (cents) 266.3 232.0 14.8 502.1
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R'000 As at As at As at
28 February 28 February 31 August
2018 2017 2017
(unaudited) (unaudited) (audited)
Non-current assets 2 953 653 2 642 084 2 854 281
Property, plant and equipment 1 640 482 1 442 171 1 533 935
Intangible assets 451 356 439 915 457 603
Goodwill 103 510 103 510 103 510
Deferred tax assets 609 422 506 822 572 223
Investment in associate 20 665 20 375 20 039
Loans receivable 8 572 9 521 4 500
Financial assets at fair value through profit or loss 25 265 22 030 27 580
Derivative financial assets 94 381 97 740 134 891
Current assets 7 833 303 6 419 638 6 866 834
Inventories 4 522 197 3 990 146 3 753 794
Trade and other receivables 2 244 047 2 153 476 2 212 719
Loans receivable 9 000 8 733 9 000
Cash and cash equivalents 886 543 115 598 700 473
Derivative financial assets 171 516 151 685 190 848
Total assets 10 786 956 9 061 722 9 721 115
Equity and liabilities
Total equity 3 707 255 2 732 426 3 300 350
Non-current liabilities 357 086 315 142 402 257
Employee benefits 158 396 131 060 209 231
Operating lease liability 198 690 184 082 193 026
Current liabilities 6 722 615 6 014 154 6 018 508
Trade and other payables 6 356 382 5 623 569 5 475 182
Employee benefits 280 950 276 503 394 460
Provisions 4 993 6 733 6 733
Income tax payable 53 624 90 033 132 991
Derivative financial liabilities 26 666 14 914 9 142
Financial liability at fair value through profit or loss - 2 402 -
Total equity and liabilities 10 786 956 9 061 722 9 721 115
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
R'000 Six months to Six months to Year to
28 February 28 February 31 August
2018 2017 2017
(unaudited) (unaudited) (audited)
Operating profit before working capital changes 1 114 426 972 264 2 040 098
Working capital changes (56 857) (242 456) (5 790)
Net interest paid 6 093 (22 452) (31 090)
Taxation paid (173 973) (225 375) (472 023)
Cash inflow from operating activities before dividends paid 889 689 481 981 1 531 195
Dividends paid to shareholders (559 324) (469 309) (677 399)
Net cash effects from operating activities 330 365 12 672 853 796
Net cash effects from investing activities (272 871) (248 826) (512 368)
Capital expenditure (269 405) (249 424) (517 850)
Other investing activities (3 466) 598 5 482
Net cash effects from financing activities 128 576 (18 048) (10 755)
Acquisition of derivative financial asset (62 272) (39 064) (39 064)
Settlement of derivative financial asset 190 848 21 016 28 309
Net increase/(decrease) in cash and cash equivalents 186 070 (254 202) 330 673
Cash and cash equivalents at the beginning of the period 700 473 369 800 369 800
Cash and cash equivalents at the end of the period 886 543 115 598 700 473
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R'000 Six months to Six months to Year to
28 February 28 February 31 August
2018 2017 2017
(unaudited) (unaudited) (audited)
Opening balance 3 300 350 2 452 241 2 452 241
Dividends paid to shareholders (559 324) (469 309) (677 399)
Total comprehensive income for the period 664 751 561 245 1 261 083
Transaction cost on share issue (283) - -
Share-based payment reserve movement 251 906 188 249 264 425
Net treasury share movement 49 855 - -
Total 3 707 255 2 732 426 3 300 350
Dividend per share (cents)
Interim declared/paid 102.5 88.0 88.0
Final paid - - 234.0
102.5 88.0 322.0
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 2018
(unaudited)
Retail 10 522 228 793 139 5 335 767 215 787 3 441 718
Distribution 6 327 735 152 729 6 014 863 41 689 4 291 257
Inter-segmental (2 417 315) (3 588) (2 879 516) - (2 839 112)
Total reportable segmental balance 14 432 648 942 280 8 471 114 257 476 4 893 863
Non-reportable segmental balance - 104 2 315 842 11 929 2 185 838
Total group balance 14 432 648 942 384 10 786 956 269 405 7 079 701
Six months to 28 February 2017
(restated)*
Retail 9 292 748 700 082 4 239 925 214 485 2 746 307
Distribution 5 861 216 139 577 5 427 312 15 971 4 044 639
Inter-segmental (2 028 863) 534 (2 375 145) - (2 340 263)
Total reportable segmental balance 13 125 101 840 193 7 292 092 230 456 4 450 683
Non-reportable segmental balance - (28 556) 1 769 630 18 968 1 878 613
Total group balance 13 125 101 811 637 9 061 722 249 424 6 329 296
Twelve months to 31 August 2017
(restated)*
Retail 19 015 139 1 486 266 4 392 678 436 715 2 889 500
Distribution 12 334 386 328 712 5 556 531 30 529 4 009 777
Inter-segmental (4 540 424) (1 401) (2 610 723) - (2 573 907)
Total reportable segmental balance 26 809 101 1 813 577 7 338 486 467 244 4 325 370
Non-reportable segmental balance - (39 305) 2 382 629 50 606 2 095 395
Total group balance 26 809 101 1 774 272 9 721 115 517 850 6 420 765
* Refer to note 1.2
R'000 As at As at As at
28 February 28 February 31 August
2018 2017 2017
(unaudited) (unaudited) (audited)
Non-reportable segmental profit before taxation consists of:
Loss on disposal of property, plant and equipment (112) (2 109) (4 868)
Financial income 12 339 3 455 10 501
Financial expense (13 468) (31 319) (47 838)
Share of profit of an associate 1 345 1 417 2 900
104 (28 556) (39 305)
SUPPLEMENTARY INFORMATION
As at As at As at
28 February 28 February 31 August
2018 2017 2017
(unaudited) (unaudited) (audited)
Number of ordinary shares in issue (gross) ('000) 253 948 245 969 245 969
Number of ordinary shares in issue including
"A" shares issued in terms of employee share
ownership programme (gross) ('000) 268 525 275 122 275 122
Number of ordinary shares in issue
(net of treasury shares) ('000) 244 505 236 526 236 526
Weighted average number of shares in issue
(net of treasury shares) ('000) 237 678 236 526 236 526
Weighted average diluted number of shares in
issue (net of treasury shares) ('000) 254 833 251 821 252 641
Net asset value per share (cents) 1 516 1 155 1 395
Net tangible asset value per share (cents) 1 289 925 1 158
Depreciation and amortisation (R'000) 167 959 143 481 297 066
Capital expenditure (R'000) 269 405 249 424 517 850
Capital commitments (R'000) 434 447 327 976 680 513
ACCOUNTING POLICIES AND NOTES
1.1 These condensed consolidated financial statements for the six months ended 28 February 2018 have
been prepared in accordance with the requirements of the JSE Limited Listings Requirements for
interim reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require interim 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 Financial Reporting Standards Council and to also,
as a minimum, contain the information required by IAS 34 - Interim Financial Reporting.
The information contained in the interim report has neither been audited nor reviewed by the
group's external auditors. These condensed consolidated financial results have been prepared
under the supervision of M Fleming CA(SA), the Chief Financial Officer of the group.
The accounting policies used in the preparation of the financial results for the six months
ended 28 February 2018 are in terms of IFRS and are consistent with those applied in the
Audited Annual Financial Statements for the year ended 31 August 2017.
1.2 The segmental analysis for the period ended 28 February 2017 and the year ended 31 August 2017
has been restated due to a change in the composition of reporting segments. Clicks Direct
Medicines is now included in Retail due to a change in management reporting lines. This has
resulted in an increase in turnover of R54.3 million and R121.6 million, an increase of
R17.5 million and R24.0 million in total assets and an increase of R16.1 million and
R15.4 million in total liabilities for the retail segment for the period ended 28 February 2017
and 31 August 2017 respectively. Within the distribution segment, turnover was increased by
R15.6 million and R13.8 million, total assets was increased by R2.9 million and decreased by
R3.6 million and total liabilities was increased by R4.3 million and R4.9 million for the
period ended 28 February 2017 and the year ended 31 August 2017 respectively.
1.3 Related party transactions for the current period are similar to those disclosed in the group's
annual financial statements for the year ended 31 August 2017. During the period Clicks Group
Limited issued 284 155 ordinary shares to the New Clicks Foundation Trust arising from the
unwind of 50% of the employee share ownership scheme. No other significant related party
transactions arose during the current period.
1.4 In terms of the unwind of 50% of the Clicks Group Employee Share Ownership Scheme, 7 979 384
ordinary shares were issued to beneficiaries of the scheme and 14 576 647 ordinary "A" shares
were repurchased by Clicks Group Limited from the Employee Share Ownership Trust. The New Clicks
Foundation Trust sold 284 155 Clicks Group Limited ordinary shares subsequent to acquiring
them through the unwind of the scheme. No other equity share transactions occurred during
the period.
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, the investment in
Guardrisk Insurance Company Limited, investments in equity and other similar instruments and
a contingent consideration liability which arose from the investment in associate in the prior
period 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. All financial instruments accounted for at fair value through profit or
loss are considered to be level 2 instruments except for investments in equity and other similar
instruments which are considered to be level 1 instruments and the contingent consideration
liability which arose from the investment in associate in the prior period is considered to be
a level 3 liability. There have been no transfers between levels 1, 2 and 3 during the period.
1.6 The majority of the current and 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), NN Gobodo*, F Jakoet*, DA Kneale# (Chief Executive Officer), M Rosen*
* Independent non-executive # British
Company secretary: M Welz
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
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196. PO Box 61051, Marshalltown 2107
Sponsor: Investec Bank Limited
http://www.clicksgroup.co.za
Date: 19/04/2018 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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