R4.4 billion
increase in market

David Nurek

While the group is only required to report in compliance with King lll for the 2011 financial year, the board has elected to start implementing the code.

Financial performance

It is a pleasure to report on the group’s sustained strong growth and the impressive returns generated for shareholders in the past year. This was achieved despite the continued challenging trading conditions which prevailed throughout the period.

The group’s headline earnings increased by 20.3% to R576 million through improved trading and efficient margin management. Diluted headline earnings per share (HEPS) continued to benefit from the share buy-back programme and increased 27.4% to 211.4 cents per share. Diluted HEPS has grown at a compound rate of 29.8% over the past five years.

A final distribution of 75.7 cents per share was declared, bringing the total distribution to 106.2 cents for the year, an increase of 26.4% on last year. The group has returned almost R2.7 billion to shareholders in distributions and share buy-backs since 2005.

Our market capitalisation on the JSE increased by R4.4 billion as the share price increased by 85% over the past year, comfortably outperforming the Food and Drug Retailers Index (up 49%), the General Retailers Index (up 41%) and the All Share Index (up 9.3%).

The group’s performance has not gone unnoticed by international investors and the foreign shareholding in Clicks Group has increased from 12.3% to 47.1% over the past year, with 29.3% of the shares held by institutions in the United States and Canada. Liquidity in the share, measured by the percentage of shares traded, improved to 113% (2009: 78%) in the past year.

The group’s trading and financial performance is covered in the Chief Executive’s Report and in the Chief Financial Officer’s Report which follow.

Governance in South Africa

South Africa is acknowledged internationally for its corporate governance standards. The recently released World Economic Forum (WEF) Global Competitiveness Report 2010 – 2011 ranks South Africa first out of 139 economies for auditing and reporting standards, and also for the regulation of securities exchanges. The country is ranked second globally for the efficacy of corporate boards and tenth for the strength of investor protection.

South Africa was also recently ranked top for corporate governance disclosure out of 24 emerging markets by the International Standards of Accounting and Reporting, a working group of the UN Committee on Trade and Development.

These accolades for a developing economy like South Africa highlight the level of international regard for our regulation, reporting and governance standards. This creates confidence at a time when the country is increasingly attractive to international investors and provides reassurance for foreign fund managers investing in our local companies.

It is, however, regrettable that South Africa’s overall economic competitiveness in the WEF Report declined nine places to 54th in the world, and the country languishes at the foot of the global index for health and primary education (129th) and the quality of maths and science education (137th).

Governance in Clicks Group

Clicks Group strives to achieve the highest standards of corporate governance and follows stringent legislative and regulatory compliance practices to ensure the sustainability of the business. The group therefore embraces the King Report on Governance for South Africa 2009 (King lll) in the interests of elevating governance standards and enhancing transparent reporting.

While the group is only required to report in compliance with King lll for the 2011 financial year, the board has elected to start implementing the code. A sub-committee of the board comprising executive management and non-executive directors has evaluated the principles of King lll against current governance practices. The group has adopted the code and in terms of the “apply or explain” principle will clarify the recommendations that will not be applied. These have been detailed in the Corporate Governance Report.

Clicks Group was recognised in the Ernst & Young Excellence in Corporate Reporting awards when the 2009 annual report was placed ninth out of the top 100 companies on the JSE. These awards are widely regarded as the benchmark for quality financial reporting and recognise the group’s efforts in continually enhancing disclosure to the investment community.

Board of directors

Our board comprises four executive directors and six non-executive directors, with all the non-executives classified as independent in terms of King ll. The independence of the non-executive directors will be reviewed by the nominations committee in January 2011 in line with the King lll recommendations. Our board continues to transform and 40% of the directors are now black and 33% are women.

In the annual board evaluation process the directors identified two main issues to be addressed. These were the need to amalgamate the audit committee and risk committee and to recruit a non-executive director with specialist healthcare expertise and a network in the healthcare sector.

The audit and risk committees have now been combined and the committee’s mandate extended to incorporate the audit and risk- related aspects of King III as well as responsibility for governance and environmental sustainability.

We were pleased to appoint Dr Nkaki Matlala, an experienced surgeon and healthcare executive, as an independent non-executive director in August 2010. Dr Matlala is a prominent figure in the South African healthcare environment and will add a new dimension to our boardroom debate and we look forward to benefiting from his healthcare knowledge.

Our chief financial officer, Keith Warburton, has resigned from the group and plans to take a break from corporate life. In his five years with the group Keith has made an outstanding contribution in transforming the financial reporting, working capital and capital management functions. Together with the executive team he has been instrumental in the group’s improved performance and has laid a solid foundation for his successor. We wish Keith every success in the future.


Inflation as measured by the consumer price index has declined to its lowest level in more than four years, higher real wage increases are being granted across most sectors of the economy and interest rates have remained stable after falling by 550 basis points over the past two years. However, further interest rate cuts are possible.

Lower interest rates are not yet translating into increased spending as consumers deleverage and reduce debt levels. This is reflected in the ratio of household debt to disposable income reducing from 80% at the end of 2009 to 78.2% by mid-2010.

Consumers are facing increasing utility costs, unemployment levels are high with limited jobs being created, and consumer confidence remains fragile.

Against this background the group remains cautious on the outlook for a recovery in consumer spending in the year ahead.


In closing I thank David Kneale and his executive team of Keith Warburton, Michael Harvey and Bertina Engelbrecht for their strong and decisive leadership. Thank you also to my fellow non-executive board colleagues for their insight and guidance.

Once again I thank the more than 9 900 staff at our stores, distribution centres and at head office for their contribution over the past year.

Thank you to our suppliers, industry regulators, business partners and media for your continued support. I also thank our shareholders locally and internationally, and the broader investment community for their active following of the group, and welcome those shareholders who invested in Clicks Group for the first time during the year.

David Nurek

David Nurek
Independent Non-executive Chairman