DIRECTORS' REPORT

The directors have pleasure in presenting their report together with the group and company financial statements for the year ended 31 August 2010.

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 561 stores in southern Africa. The company’s subsidiaries cover the pharmaceutical supply chain from wholesale distribution to retail pharmacy as well as music, entertainment and beauty and cosmetic products.

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 R565 million (2009: R472 million).

Share capital

In terms of the specific authority granted by shareholders in the annual general meeting held on 18 January 2010 as contemplated in section 221 of the Companies Act No. 61 of 1973 (as amended), the company elected to issue 6 072 871 shares for a subscription price of 1 cent and a premium thereon of R26.98 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 14 May 2010 as contemplated in section 221 of the Companies Act No. 61 of 1973 (as amended), the company elected to issue 2 460 506 shares for a subscription price of 1 cent and a premium thereon of R34.89 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.

27 367 849 cancelled on 19 November 2009
 
During the year under review the company continued with its share buy-back programme as set out below.
   
25 048 880 shares held by a subsidiary of the company as treasury shares at 1 September 2009
10 673 743
 
shares in terms of general repurchases between 1 September 2009 and 31 August 2010 by a subsidiary of the company
8 533 377 shares issued to a subsidiary of the company in order to raise cash to make distributions
(27 367 849) shares bought back into the company and cancelled on 19 November 2009
16 888 151 held by a subsidiary of the company as treasury shares at 31 August 2010

 

Distributions to shareholders

Interim

The directors approved a distribution of 30.5 cents per share (2009: 24.5 cents per share) comprising a capital reduction out of share premium in lieu of a dividend (“the distribution”). The distribution was paid on 5 July 2010 to shareholders registered on 25 June 2010.

Final

The directors have approved a final distribution of 75.7 cents per share (2009: 59.5 cents per share). The source of such distribution will be a capital reduction out of share premium. The distribution will be payable on 31 January 2011 to shareholders registered on 21 January 2011.

Events subsequent to balance sheet date

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. On 21 October 2010 the group announced plans to introduce an employee share ownership scheme which will be subject to approval by shareholders at the annual general meeting on 18 January 2011.

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.

Appointments

Dr Nkaki Matlala was appointed as an independent non-executive director on 24 August 2010.

Resignations and retirement

Keith Warburton tendered his resignation as an executive director on 5 August 2010 with effect from 31 March 2011.

Retirement and re-election of directors

In accordance with the company’s articles of association David Kneale, Michael Harvey, Martin Rosen and Dr Nkaki Matlala retire by rotation at the forthcoming annual general meeting. The retiring directors, being eligible, offer themselves for re-election.

Directors’ interest in shares

Details of the directors’ beneficial interests in the company’s issued share capital are given here.

There have been no new awards of share options since August 2005.

David Nurek, indirectly through a family trust, took delivery of 500 000 shares in respect of options which had previously been allocated and exercised in September 2000, on 28 October 2009. The trust sold 300 000 of these shares at a price of R24.10 per share on the open market on 28 October 2009.

John Bester indirectly, in the name of a family trust of which he is a trustee and discretionary beneficiary, purchased 10 000 shares on 9 November 2009 at a price of R25 per share. These shares are retained. In terms of the cash-settled employee incentive scheme requiring all the participants at the end of the incentive performance period to take up the equivalent of a fixed percentage of the after-tax cash settlement to purchase ordinary shares of the company from the market, David Kneale purchased 109 446 shares on 3 December 2009 at a price of R25.89 per share, Keith Warburton purchased 46 121 shares on 3 December 2009 at a price of R25.89 per share, Michael Harvey purchased 43 815 shares on 3 December 2009 at a price of R25.89 per share and Bertina Engelbrecht purchased 34 591 shares on 3 December 2009 at a price of R25.89 per share.

Amanda Bester, the wife of John Bester, purchased 1 000 shares on 19 November 2009 at an average price of R25.59 per share.

The only change in these interests between the end of the company’s financial year and 12 November 2010, 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 50 000 shares on 26 October 2010 at a price of R44.35 per share.

Incentive schemes

Information relating to the incentive schemes is set out here.

Special resolutions

Special resolutions passed at the annual general meeting held on 18 January 2010 and registered on 22 January 2010:

Special Resolution No. 1: General authority to repurchase shares

Special Resolution No. 2: Amendment to article 89 of the company’s articles of association

No special resolutions were passed at the general meeting held on 14 May 2010.

Holding company

The company has no holding company.

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 R565 million (2009: R473 million).