Unaudited interim Group Results - For the six months ended 28 February 2007
Cash flow
in equity


New Clicks has made marked progress over the past six months in its turnaround strategy to achieve sustainable performance, while at the same time investing in the growth of the business to ensure long-term competitiveness and shareholder value creation.

The group has produced a much improved operational and financial performance, with progress in certain areas being ahead of the objectives set by the board at the outset of the turnaround programme in early 2006.

Financial performance

Group turnover increased by 12.1% to R5.6 billion, with weighted inflation measured at 1.0% for the period. Turnover for the retail businesses grew 14.2% and by 14.1% on a comparable store basis, against price inflation of 1.2%. UPD increased turnover by 11.3% with inflation at 0.5%.

Retail gross margin was impacted by one-off charges and declined by 130 basis points to 26.8%. The underlying trading gross margins, including shrinkage, are stable and management expects the retail margin for the full year to be in line with last yearís 27.1%. UPDís total income, which comprises gross profit and other income (largely comprising logistics fees), was maintained at 8.6% of turnover for the period.

Operating expenses were well managed and growth was contained at 5.2%, well below the level of turnover growth.

As a consequence of both the increased turnover and tight expense control, operating profit increased by 23.7%. Group operating margin increased from 4.5% to 5.0%.

Headline earnings increased by 34.4% to R187.5 million. Diluted headline earnings per share increased by 34.1% to 53.9 cents per share, in line with the forecast range provided in the groupís trading statement on 12 April 2007.

The intense focus on working capital management has paid dividends. Inventory levels declined 0.8% over the corresponding period in 2006 and the days cost of sales in inventory improved from 65 to 57 days.

The group generated cash from operating activities of R532 million for the period and utilised R256 million to repurchase shares, R88 million for capital expenditure and R78 million for the payment of the 2006 final distribution to shareholders. A total of 22.2 million shares, representing 6.2% of the issued share capital, were repurchased in the market at an average price of R11.52 per share. At 28 February 2007 the groupís cash and cash equivalents were R175 million, compared to a deficit of R431 million at the end of the first half of 2006.

The group has adopted return on assets managed (ROAM) as one of the key performance measurements for its component businesses. ROAM improved from 15.7% in February 2006 to 18.5% in February 2007. The groupís return on equity (ROE) increased from 17.7% to 22.4%.

Trading performance


Clicks lifted turnover by 14.1% as the transition of the business to a health and beauty specialist continued, with the core categories of health growing 19.8% and beauty 17.0%. Comparable store growth was 14.7% and inflation for the period was 1.9%. Improved operating efficiencies contributed to a 31.0% growth in operating profit to R152 million. Clicks opened a further 14 pharmacies in the past six months and now has 124 dispensaries nationwide.

Discom has continued to refine its focus on the lower income market and increased turnover by 13.2% and by 12.3% on a like-for-like basis. Inflation for the period was 1.0%. The operating margin was impacted by a change in the product mix and certain one-off charges, which resulted in a 2.5% decline in operating profit to R20 million.

Strong DVD, gaming and local music sales lifted Musicaís turnover by 14.8%, with same-store growth at 11.7%. The business experienced price deflation of 2.6% for the period. Non-music merchandise contributed 40% of turnover. Operating profit rose 18.4% to R37 million.

The Body Shop increased turnover by 27.0%, driven by the success of the new in-store loyalty programme and the relaunched make-up range. Comparable store sales grew 17.9%. Operating profit for the period increased 23.5% to R7 million.

The group continues to capitalise on opportunities to expand its store footprint and opened 15 stores in the first half of the year, with a further 19 planned for the balance of the financial year.

Wholesale distibution

UPD increased turnover by 11.3%, in line with managementís expectations. Expenses were well managed to 5.4% of turnover, which contributed to a 23.6% growth in operating profit to R65 million. In order to further improve operating efficiencies, UPD has invested R45 million in the automation of the ethical warehouse at its head office in Gauteng which will be completed at the end of May.


As the group continues to focus on delivering sustainable performance, managementís priorities are to entrench Clicks as a health and beauty specialist, establish leadership in healthcare supply and pharmacy management, and transform Musica into an entertainment specialist.

Financial management is being enhanced through tight expense control, increased cash flow generation and by optimising the balance sheet structure to achieve an ROE of 30% in the medium term.

Trading since the end of February has been in line with forecasts. Modest levels of price inflation are expected for the remainder of the financial year.

Earnings forecast

In the absence of any deterioration in trading conditions or any other unforeseen factors, the directors expect the groupís diluted headline earnings per share and diluted earnings per share for the year to 31 August 2007 to be between 30% and 40% higher than the last financial year. Shareholders are advised that these forecasts have not been reviewed or reported on by the groupís auditors.

Registered address Cnr Searle and Pontac Streets, Cape Town 8001, PO Box 5142, Cape Town 8000

Directors D.M. Nurek* (Chairman), P.F.K. Eagles*, M.J. Harvey, D.A. Kneale(Chief Executive Officer), R.L. Lumb*, M. Rosen*, R.V. Smither*, L.A. Swartz*, K.D.M. Warburton (Chief Financial Officer)
* non-executive     † British

Transfer Secretaries Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107

Sponsor Investec Bank Limited

This information, together with additional detail is available on the New Clicks Holdings website: http://www.newclicks.co.za

Registration Number 1996/000645/06       Share code: NCL        ISIN: ZAE000014585