In a period characterised by increasingly
tough retail conditions, New Clicks delivered
pleasing financial and trading results.
The group further entrenched its leadership in
healthcare retail and supply through the
growth of pharmacy in Clicks and the
acquisition of a 60% stake in the courier
pharmacy business Direct Medicines with
effect from 1 December 2008.
New Clicks has also continued to invest for
long-term growth, with a capital expenditure
plan focusing on opening and refurbishing
Clicks stores, extending the national
pharmacy network within Clicks and
expanding UPD’s pharmaceutical distribution
The board’s confidence in the group’s
performance and prospects is reflected in a
30.3% increase in the interim distribution to
24.5 cents per share (2008: 18.8 cents). As
previously advised to shareholders,
distribution cover is being reduced to two times headline earnings for the 2009 financial
Group turnover from continuing operations
increased by 7.0% to R6.0 billion (2008:
R5.6 billion). The retail turnover growth of
13.6% was driven by the excellent trading
performance of Clicks which lifted turnover by
15.4%. Selling price inflation for the retail
businesses was 6.3%.
The repositioning of the UPD business model
to focus on more profitable and loyal
customers resulted in sales growth slowing in
line with expectations to 1.7%. Price inflation
for the period was 3.8%.
Total income (gross profit plus other income)
increased 12.3% to R1.5 billion.
Operating expenses increased by 10.5%.
Excluding the costs relating to the investment
in new stores, pharmacies and Direct
Medicines, expense growth was well
contained to 7.1%.
Operating margin increased from 5.3% to
5.9%, resulting in an 18.5% growth in operating profit to R355 million (2008:
Headline earnings increased 10.6% from
R209 million to R232 million. Diluted headline
earnings per share increased 18.8% to
80.3 cents per share, enhanced by the share
Return on shareholders’ interest (ROE)
showed a healthy improvement from 32.6% to
Cash generated from operations increased by
15.7% to R424 million. The free cash flow
increased to R355 million from R137 million
last year. This was positively impacted by the
improved trading performance of the group
and favourable funding from trade payables.
Clicks continued its strong sales growth trend
and lifted turnover by 15.4%, with real sales
growth of 8.9%. Comparable store sales rose
by 13.7%. Growth was driven by the health and beauty merchandise categories which
together account for 75.2% of total Clicks
sales. Clicks has accelerated the pace of its
pharmacy expansion programme, growing
the pharmacy base to 180 following the
opening of 23 dispensaries in the period.
Further improvements in operating efficiencies
lifted the operating margin from 6.0% to 6.6%
which translated into operating profit growth
Following the repositioning of UPD towards
more profitable volume, its core customer
groups of Clicks, Clicks Direct Medicines,
hospitals and Link pharmacies now account
for 76% of UPD’s wholesale business, up from
64% in 2008. UPD’s distribution and export
business grew by 47.9%. Good expense
management and improved operating
efficiencies contributed to a 12.0% increase in
Musica increased turnover by 3.3% as the
slowdown in consumer spending continued to
impact discretionary purchases. Operating
profit for the period was down 1.9%.
Turnover in The Body Shop benefited from
new store openings and increased 9.2%, with
operating profit up 9.0%.
Retail trading conditions are expected to
remain challenging in the coming months.
However, the group’s business is defensive
and competitively advantaged.
The listing of New Clicks on the JSE will be
reclassified to the Food and Drug Retailers
sector on 22 June 2009, which will more
accurately reflect the current and future
composition of the group’s earnings.
The group continues to be cash generative
and R140 million has been committed to
capital investment for the remainder of the
Trading for the first two months of the second
half of the financial year has continued in line
with the performance for the first half.
In the absence of any marked deterioration in
trading conditions and any unforeseen
changes in the macro-economy, the group expects diluted headline earnings per share to
increase by between 15% and 20% for the year
to 31 August 2009. This forecast has not been
audited or reviewed by the company’s auditors.