Directors' report

The directors have pleasure in presenting their report together with the group and company annual financial statements for the year ended 31 August 2011.

Nature of business

The company is an investment holding company listed in the Food and Drug Retailers sector of the JSE Limited. Its subsidiaries include the country’s leading provider of health and beauty merchandise through a network of 590 stores in southern Africa. The company’s subsidiaries cover the pharmaceutical supply chain from wholesale distribution to retail pharmacy as well as beauty and cosmetic products. The company operates primarily in southern Africa.

Group financial results

The results of operations for the year are set out in the consolidated statement of comprehensive income. The profit attributable to ordinary shareholders for the year is R651 million (2010: R565 million).

Share capital

In terms of the specific authority granted by shareholders in the annual general meeting held on 18 January 2011 as contemplated in section 221 of the Companies Act No. 61 of 1973 (as amended), the company elected to issue 4 639 549 shares for a subscription price of 1 cent and a premium thereon of R43.01 each to New Clicks South Africa (Proprietary) Limited in order to raise cash to make distributions to its shareholders.

In terms of the specific authority granted by shareholders in the general meeting held on 18 January 2011, the company issued 29 153 295 “A” shares for a subscription price of 1 cent to the Clicks Group Employee Share Ownership Trust in respect of the group’s broad-based black economic empowerment (“BBBEE”) transaction.

In terms of the specific authority granted by shareholders in the general meeting held on 1 June 2011 as contemplated in section 38 of the Companies Act No. 71 of 2008 (as amended), the company elected to issue 2 348 905 shares for a subscription price of 1 cent and a premium thereon of R42.62 each to New Clicks South Africa (Proprietary) Limited in order to raise cash to make distributions to its shareholders.

The following ordinary shares of 1 cent each, held as treasury shares by a subsidiary of the company, were bought back by the company and cancelled.

20 343 271	cancelled on 2 December 2010
During the year under review the company continued with its share buy-back programme as set out below.
16 888 151	shares held by a subsidiary of the company as treasury shares at 1 September 2010
13 663 843	shares in terms of general repurchases between 1 September 2010 and 31 August 2011 by a subsidiary of the company
6 988 454	shares issued to a subsidiary of the company in order to raise cash to make distributions
(20 343 271)	shares bought back into the company and cancelled on 2 December 2010
17 197 177	held by a subsidiary of the company as treasury shares at 31 August 2011

Distributions to shareholders

Interim

The directors approved a distribution of 37 cents per share (2010: 30.5 cents per share) comprising a capital reduction out of share premium in lieu of a dividend (“the distribution”). The distribution was paid on 4 July 2011 to shareholders registered on 24 June 2011.

Final

The directors have approved a final distribution of 88 cents per share (2010: 75.7 cents per share) subject to the approval being granted by shareholders at the annual general meeting to be held on 17 January 2012. The source of such distribution will be a capital reduction out of share premium and accordingly results in a reduction in contributed tax capital. The distribution will be payable on 30 January 2012 to shareholders registered on 20 January 2012.

Events after the financial year-end

No significant events, other than the declaration of the final distribution, as set out above, took place between the end of the financial year under review and the date of this report.

Directors and secretary

The names of the directors in office at the date of this report are set out here, and the company secretary’s details are set out here.

Appointment

Michael Fleming was appointed as executive director and as group financial director and chief financial officer with effect from 31 March 2011.

Resignation

Keith Warburton resigned as an executive director with effect from 31 March 2011.

Retirement and re-election of directors

In accordance with the company’s memorandum of incorporation (“MOI”) Fatima Abrahams, John Bester and Bertina Engelbrecht retire by rotation at the forthcoming annual general meeting. Michael Fleming retires in terms of the company’s MOI. The retiring directors, being eligible, offer themselves for re-election.

Directors’ interest in shares

David Nurek, indirectly through a family trust, sold 50 000 shares at a price of R44.35 per share on 26 October 2010.

In terms of the cash-settled long-term employee incentive scheme which requires all participants at the end of the three-year incentive performance period to purchase shares on the open market to the equivalent of 25% of the after-tax cash settlement value, the executive directors made the following purchases on 30 November 2010 at a price of R43.44 per share: David Kneale purchased 56 199 shares, Keith Warburton purchased 23 694 shares, Michael Harvey purchased 22 499 shares and Bertina Engelbrecht purchased 17 762 shares.

John Bester purchased 2 000 shares directly on 7 February 2011 at a share price of R38.24 per share.

David Kneale sold 100 000 shares directly on 29 August 2011 at a share price of R39.28 per share.

The only change in these interests between the end of the company’s financial year and 17 November 2011, being a date not more than one month prior to the date of notice of the annual general meeting, is the sale by David Nurek, indirectly through a family trust, of 39 688 shares on 25 October 2011 at a price of R39.79 per share.

Incentive schemes

Information relating to the incentive schemes is set out here.

Special resolutions

Special resolution passed at the annual general meeting held on 18 January 2011 and registered on 28 January 2011.

Special Resolution No. 1: General authority to repurchase shares

Special resolutions passed at the general meeting held on 18 January 2011 and registered on 28 January 2011.

Special Resolution No. 1 – Approval for the amendment of the memorandum and articles of association to increase the company’s authorised share capital by the creation of “A” shares for the BBBEE scheme

Special Resolution No. 2 – Specific repurchase of the “A” shares at par value

Special Resolution No. 3 – Approval for financial assistance to the trust and beneficiaries

Special resolutions passed at the general meeting held on 1 June 2011 and lodged with the Companies and Intellectual Property Commission (CIPC) on 2 June 2011.

Special Resolution No. 1 – Amendment to article 96.2

Special Resolution No. 2 – Amendment to article 98

Special Resolution No. 3 – Authority to implement the specific issue

Subsidiary companies

The names of the company’s main subsidiaries and financial information relating thereto appear here.

The interest of the company in the aggregate income after taxation is R651 million (2010: R565 million).