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AGM Annexure 1 Analysis of Shareholders Shareholders' Diary Definitions

 

Sustainability Report

Introduction

The Clicks Group recognises the social responsibility that accompany its position as a market leader in healthcare, as a listed company, as a large-scale employer and as a good corporate citizen within the communities in which it does business.

Management believes sustainable development will benefit its stakeholders in the longer term by:

• Enhancing value for shareholders
• Improving opportunities for employees
• Creating a more compelling offer for customers
• Empowering and uplifting communities

This report is presented across the three pillars of social, economic and environmental sustainability. The group subscribes to the integrated sustainability reporting philosophy advocated in the King lll Report. Following a detailed evaluation of this latest governance framework, the group will seek to incorporate the recommendations into sustainability practices where appropriate.

Management remains committed to expanding sustainability management while enhancing financial returns to shareholders, and plans to provide non-financial performance goals and targets in the future.

Sustainable progress in 2009

In the 2008 annual report the group outlined the sustainability priorities for the year ahead and has made pleasing progress against most of these objectives:

Sustainability priorities for 2009	Performance against priorities in 2009
Improve rating in JSE Socially Responsible Investment Index	Ranked 57th in the Index evaluation Did not qualify for inclusion in Index
Improve quality of employee commitment	A customised tool to measure employee commitment will be launched in February 2010
Maintain corporate social investment (CSI) focus through the Clicks Foundation and business units	Invested R14.4 million in social upliftment, equivalent to 3.05% of net profit after tax (target is 1%)
Ongoing progress on transformation	Improved to level 5 BBBEE compliance from level 6 in 2008
Build sustainable pharmacy profession through the Pharmacy Healthcare Academy	370 learners registered on programmes through the Pharmacy Healthcare Academy
Expand primary care clinic network in Clicks stores	105 clinics operating in Clicks stores
Continue to grow market share and increase customer loyalty	Market share gains in most key categories
	2.65 million ClubCard loyalty customers
Overall improvement in earnings and shareholder value	Diluted headline earnings per share increased by 26.2% Total distributions to shareholders up 37.5% Return on shareholders’ interest increased from 32.8% to 42.3% Growth of R1.1 billion in market capitalisation

Sustainability strategy and plans

	Successes	Challenges	Way forward
	Invested R39.7 million on learning and development Registered 647 learners on learnership and skills programmes 4 523 employees participated in learning and development programmes Committed to invest 1% of after-tax profit on CSI CSI spend of R14.4 million in 2009	Retention of key and critical talent, notably pharmacists Implementing the Hay-based total rewards strategy across the group Constructive employee engagement initiatives to reduce turnover and enhance the quality of service	Develop a detailed plan to implement the group’s total rewards framework Develop the group employee value proposition and employee commitment index Continue to strengthen the talent management process
	Increased the pharmacy footprint to 207 Improved the group’s BBBEE rating to level 5 Invested R26.9 million in the UPD owner-driver scheme Weighted BEE procurement spend of R5.3 billion Enrolled additional 130 000 ClubCard members (57% of new members are black) Total ClubCard members now 2.65 million	Increasing market share of black female consumers Suppliers who are not BBBEE rated The economic environment impacting sales growth	Develop process to receive BBBEE certificates as part of supplier negotiation Investigate a potential black enterprise development initiative within the healthcare market
	Implemented an environmental management governance framework Participated in the Carbon Disclosure Project and the WWF Earth Hour campaign Recycled 1 150 tons of plastic, paper and cardboard Partnered with the Global Carbon Exchange to calculate the group’s carbon footprint and to complete an energy efficiency audit using the global GHG protocols	Fostering a “green mind-set” Engaging with suppliers and stakeholders around the group’s environmental management agenda Entrenching environmental management as part of the strategic and operations planning process	Develop targets to mitigate against climate change Establish an environmental management committee Develop an environmental management scorecard

Integrated sustainability reporting

A range of sustainability indicators have been identified across the group’s financial and trading performance, employees, transformation and environmental management to benchmark progress on sustainability practices within the group. These indicators are regularly reviewed to take account of changes and progress within the business. As the group adopts a more integrated approach to sustainability reporting in the year ahead in line with the recommendations of King lll, it is anticipated that further indicators will be provided to shareholders.

Sustainability indicators		2009	2008	2007	2006
Financial performance
Headline earnings	R’m	478	400	357	252
Diluted headline earnings per share	cents	165.9	131.5	103.0	71.0
Return on shareholders’ interest (ROE)	%	42.3	32.8	24.7	16.7
Return on total assets	%	12.3	10.5	9.3	7.2
Distributions per share	cents	84.0	61.1	48.2	33.2
Change in market capitalisation (net of treasury shares)	R’m	1 109	(321)	1 223	840
Wealth created through cash value added	R’m	2 413	2 113	2 112	1 780
Trading performance
Total leased trading area	m²	267 776	259 884	252 239	241 551
Number of stores		540	519	500	482
In-store dispensaries		207	157	125	110
In-store clinics		105	97	92	81
Market share
–  Clicks: front shop health	%	37.2	35.5	**	**
–  Clicks: retail pharmacy	%	11.1	9.0	**	**
–  Clicks: beauty	%	24.5	25	25	25
–  Musica: CD	%	44	41	38	*
–  Musica: DVD	%	23	22	20	*
–  Musica: Gaming software	%	9	9	9	*
–  UPD: private wholesale distribution	%	23.6	26.4	25.6	24.9
Employees***
Permanent staff		7 585	7 122	9 076	9 058
Staff turnover	%	26.1	21.2	23.4	23.9
Skills development as a % of basic payroll	%	4.3	3.6	2.8	1.1
Employee wellness utilisation	%	21	19	18	–
Transformation***
Employment equity
–  Black staff as a % of total staff	%	84.3	84.2	86.9	82.6
–  Black senior and top management	%	11.5	18	24	22
–  Black middle management	%	41	35	37	35
–  Black junior management	%	65	80	86	73
–  Black directors	%	33	36	22	20
–  Women as a % of total staff	%	62.6	62	60	60
–  Women senior/top management	%	32	36	43	28
–  Women middle management	%	45	53	58	59
–  Women junior management	%	63	62	63	60
–  Women directors	%	33	27	9	10
Transformation rating	Level	5	6	7	*
Corporate social investment spend	R’m	14.4	9.8	0.4	0.4
Environmental indicators
Carbon emissions (CO2e)	Tons	134 341	127 014	*	*
Electricity consumption	Metric tons	90 499	86 811	*	*

*	Not previously disclosed or measured
**	Basis of calculation changed therefore no longer comparable
***	The statistics for 2006 and 2007 include Discom in the calculations

Further commentary on these specific indicators, and where appropriate reasons for movements in the figures, is contained in the relevant sections of this annual report:

	Financial performance	Chief financial officer’s report
	Trading performance	Operational reviews
	Employees	Sustainability Report
	Transformation	Sustainability Report
	Environment	Sustainability Report

Value added statement

for the year ended 31 August

	2009 R'm	2008 R'm
Turnover	12 175	11 244
Other income and finance income	579	520
Paid to suppliers for goods and services	(10 341)	(9 651)
Value added	2 413	2 113
Applied as follows:
Employees – salaries, wages and other benefits	1 218	1 047
Lessors for use of premises	352	303
Lenders for monies borrowed	69	70
Providers of capital – cash distributions	14	27
Tax	191	187
Corporate tax	186	182
Property taxes	5	5
Reinvested in the group	569	479
Deferred tax	(11)	(38)
Depreciation and amortisation	122	103
Retained income	458	414
Distribution of value added	2 413	2 113

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Social sustainability

Employee profile

The group is committed to creating a diverse workforce which reflects the demographics of South Africa. The promotion and advancement of previously disadvantaged people and the empowerment of women remains a priority.

There has been a marginal improvement in employment equity and the group recognises the challenge to increase representation of black people and women at the middle, senior and top management levels. This is a high priority for the transformation forums at both the group and business unit level.

The following table provides detail on the group’s workforce profile by race, gender and occupational level at year-end.

Occupational level	Female				Male
	African	Coloured	Indian	White	African	Coloured	Indian	White	Total
Top management	0	1	0	3	1	0	1	12	18
Senior management	0	3	0	21	2	1	1	41	69
Professionally qualified	22	29	19	89	24	30	21	118	352
Skilled	227	365	119	444	234	157	83	180	1 809
Semi-skilled	1 937	1 221	208	246	1 378	422	149	98	5 659
Unskilled	14	6	20	0	13	2	18	0	73
Total	2 200	1 625	366	803	1 652	612	273	449	7 980

Click to enlarge

Employee turnover*

	2009	2008
Permanent staff at start of year	7 122	9 076
Add: Recruitments	2 230	1 602
Acquisition of Direct Medicines	129	–
Less: Resignations	(1 436)	(1 562)
Deaths	(40)	(41)
Dismissals	(359)	(260)
Retirements	(37)	(34)
Retrenchments	(24)	(23)
Disposal of Discom	–	(1 636)
Permanent staff at year-end	7 585	7 122
Permanent staff turnover %	26.1	21.2
* Excludes contract workers

The staff turnover rate has increased to 26.1%. The opening of 21 new stores, a further 50 pharmacies and the acquisition of courier pharmacy business Direct Medicines resulted in a 7% growth in employment. Staff retention improved as resignations declined by 8% over the year. The renewed focus on rigorous performance management and a zero tolerance approach to non-compliance has seen a 38% increase in dismissals.

A retention strategy has been approved to attract and retain high potential, high performing talent and black talent. The group is also developing an employee value proposition and launching a customised employee commitment index in 2010 to gauge the level of employee satisfaction.

The employee wellness programme aims to reduce the challenges faced by employees which could give rise to absenteeism, such as healthier lifestyles, relationship issues and personal financial management.

Total rewards strategy
During the year the group implemented the total rewards strategy which is aimed at driving a high performance culture that consistently delivers above average returns to shareholders through employees who are motivated and fully engaged.

The total rewards philosophy integrates the five key elements that attract, motivate and retain the human capital required by the group to achieve the business objectives. These elements are compensation, benefits, performance and recognition, talent and development, and work-life balance.

The Clicks Group’s pay and benefits are competitively positioned in relation to the retail industry and general market and 20% above the minimum wage determination for the retail sector. Employees are entitled to statutory benefits, including annual leave, maternity leave, paternity leave and family responsibility leave. Employees also receive an annual performance bonus and staff discounts. Further details on staff benefits are outlined in the remuneration report.

Employee freedom of association
Clicks Group has a formal recognition agreement with the South African Commercial Catering and Allied Workers’ Union (SACCAWU). SACCAWU represents 47% of full-time permanent employees in the bargaining unit and 35% of the Clicks brand employees. A total of 37% of permanent employees in UPD are represented by the Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union (CEPPAWU).

Skills development
The group increased its investment in skills development to R39.7 million
(2008: R26.7 million) which equates to 4.3% of basic payroll costs.

A total of 4 523 employees attended learning and development programmes
(2008: 2 607) with black employees representing 85% of the total employees trained. Workplace experience opportunities were granted to 48 students and graduates through the internship programme.

The number of employees on registered learnership and skills programmes increased from 170 in 2008 to 641.

Employee wellness
The philosophy of the employee wellness programme (EWP) is to encourage and support behaviour that results in employees making healthy lifestyle choices.

EWP supports employees who have lost or are at risk of losing their “wellness balance”, and also strongly advocates prevention by encouraging employees to tackle issues as soon as they arise.

The programme offers employees and their family members a confidential professional counselling service 24 hours a day in all official languages, financial and legal advice, trauma and health management services, management and supervisory support and HIV testing, management and support.

Voluntary counselling and testing (VCT) was undertaken at the head office and eight distribution centres across the country.

Employee wellness programme	2009	2008
Employee utilisation	1 427	1 309
Family utilisation	167	74
Total utilisation rate	21%	19%
Manager referrals	55	23
High-risk cases	16	34
Employees on HIV programmes	63	55
Wellness training	1 481	59

The increase in wellness training, together with the success of the VCT programmes, has resulted in an increase in engagement and utilisation and a decrease in high risk cases.

Health and safety

A health and safety policy covers employees, contractors and customers.

Health and safety committees have been formed across the group and committee members have been trained as health and safety representatives.

Health and safety monitor

Description	Employees
Health and safety representatives	56
Fire-fighters	98
First aid representatives	60
Occupational health and safety representatives	44
Injuries on duty	68
Occupational diseases	0
Lost days	0
Fatalities	0

Corporate social investment

The Clicks Group recognises that sustainable community development depends on the support of corporates and external partners alike. Through the Clicks Foundation the group has committed to investing 1% of profit after tax in social upliftment.

Over the past year R14.4 million was invested in community support. This included direct financial support of R1.4 million in healthcare and well-being projects, as well as merchandise donations of R13 million.

Employee payroll giving
Employees are encouraged to participate in a payroll giving initiative and to volunteer time, money and goods towards community social investment projects. Employees have identified beneficiaries in their communities and co-ordinated programmes to collect and distribute gifts. Examples include Christmas toy campaigns undertaken with local community and regional radio stations and NGOs and a book collection to support the Helderberg Rape Crisis centre.

Primary care clinics
Clicks supports government’s vision of making healthcare more affordable and accessible. Through its national network of over 200 pharmacies Clicks operates primary care clinics which provide a professional, convenient and affordable alternative for basic medical advice and health checks. Services offered in the clinics include:

• Blood pressure, cholesterol and glucose screening;
• Baby immunisation, consultation and advice;
• HIV/AIDS testing and counselling;
• Wound care;
• Treatment of minor ailments; and
• General counselling and advice.
   

Business unit	CSI support and programmes
Clicks	Ongoing support for organisations assisting cancer patients and cancer survivors:
	Journey of Hope (which supports breast cancer survivors in breast reconstruction surgery)
	Look Good Feel Better (which supports cancer patients who have undergone chemotherapy)
	CANSA (in raising awareness around the prevention of cancer through the Sunsmart campaign)
	Provided financial support for equipment for hospitals and clinics. The key beneficiaries were the Red Cross Children’s Hospital, St Luke’s Hospice and the Somerset Hospital.
UPD	The Topsy Foundation received funding to support their Grootvlei HIV/AIDS sanctuary and product donations
	Donated R700 000 in stock to organisations Oasis Haven, Chatsworth Cheshire Homes, Befrienders and Nazareth House
Musica	Partnered with Carel du Toit Trust for the Give the Gift of Hearing campaign to enable five children to receive hearing aids
	Donated stock valued at around R1 million to a range of charities, including Dance for All, the Cape Town Festival and the Carel du Toit Trust
The Body Shop	Continued the partnership with Children on the Edge by supporting Yabonga, a HIV/AIDS youth empowerment programme
	Sponsored computer training for 11 Yabonga youth counsellors and donated computers and printers

Economic sustainability

Transformation
The group’s transformation strategy is aligned to the Department of Trade and Industry’s codes of good practice. The commitment to sustainable transformation is entrenched through the board transformation committee, the group internal transformation committee in which both the chief executive and the group human resources director participate, and business unit transformation forums which are responsible for implementation.

Transformation rating

BBBEE Category	2010 targets	2009	2008*
Ownership	0	2.26	2.53
Management control	7	7.79	7.64
Employment equity	17	6.07	6.20
Skills development	14	11.53	9.90
Preferential procurement	10	13.51	11.71
Enterprise development	12	9.25	9.37
Socio-economic development	5	5.00	5.00
Total	65	55.41	52.35
Level	4	5	6
*  Based on self-assessment. Following the publication of this report the BBBEE status was externally verified as level 6.

Preferential procurement
The group’s preferential procurement spend was R5.3 billion or 48%, increasing from 46% in 2008. In the past year 25.9% of the total procurement spend was from level 4 and higher rated suppliers. The group is committed to procuring from locally based and empowered suppliers and encourages suppliers to externally verify their BBBEE status.

Enterprise development
The UPD owner-driver scheme demonstrates the commitment to transformation and socio-economic development. The scheme was established in 2003 and currently has 52 owner-drivers contracted to deliver products to pharmacies, hospitals and clinics.

UPD paid R26.9 million for services from the owner-driver scheme and a further R0.6 million to the management company appointed to manage the scheme.

Environmental sustainability

The group aims to embed environmental management into its operations to ensure sustainable business practices. The board risk committee has ultimate accountability for environmental sustainability, while the group human resources director has responsibility for the implementation of the environmental management policy. An internal committee of volunteers from all business units is tasked with internal co-ordination, raising employee awareness and reporting on environmental management.

Environmental management

• Energy efficiency

The group continued its participation in the global carbon disclosure project (CDP). The project assesses the potential risks and opportunities relating to climate change and greenhouse gas emissions (GHG). The group partnered with Global Carbon Exchange to conduct an energy efficiency audit to improve the level of understanding of energy usage, areas of inefficient energy usage, the cost of technology to implement savings and related opportunities.

• Carbon footprint

For the second consecutive year an independent evaluation was commissioned on the group’s carbon footprint based on internationally recognised GHG protocols.

Scope 1 emissions (CO2e) metric tons	2009	2008
Company-owned cars	2 322	2 182
Fugitive emissions	3 588	2 841
Generators	33	231
Scope 2 emissions (CO2e) metric tons
Purchased electricity	90 499	86 811
Scope 3 emissions (CO2e) metric tons
Business travel	2 089	2 107
Product distribution	15 675	13 941
Employee commute	20 135	18 901
Total	134 341	127 014

The 5.8% increase in emissions is attributable to the growth in retail stores, as well as the development of pharmaceutical compliant distribution facilities for UPD in Johannesburg and Cape Town which required air-conditioned temperature control. Following the completion of the energy efficiency audit, the group is able to determine its baseline carbon impact and set measurable targets to reduce its carbon footprint.

• Waste management/recycling

Over the past year 1 150 tons (2008: 942 tons) of plastic, cardboard and paper were recycled. Recycling at head office has been outsourced to the Oasis Association, a non-profit community-based organisation which promotes the reuse of goods and materials.

• Employee awareness programmes

Programmes aimed at raising employee awareness of the individual and collective impact on the environment included participation in the WWF Earth Hour campaign, and staff initiated programmes to reduce and recycle paper and to participate in the Mission Green Earth tree project in Woodstock and a “green team” to focus on energy-saving opportunities.

Environmental management plans
In the year ahead the group plans to address the following:

• Improve the central co-ordination and reporting of environmental initiatives across the group
• Investigate the viability of a pilot Clicks brand green store
• Continue participation in the CDP and support for the WWF Earth Hour campaign
• Agree targets and a scorecard aimed at managing the environmental impact
• Enhance employee engagement around the environmental agenda
• Engage with suppliers and stakeholders on the group’s environmental agenda
• Expand the recycling project to UPD and enhance the focus on recycling within the retail brands