INTERIM GROUP RESULTS for the six months ended 28 February 2009


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 UPDís pharmaceutical distribution capability.

The boardís confidence in the groupís 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 year.

Financial performance
Continuing operations

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: R299 million).

Total group

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 buy-back programme.

Return on shareholdersí interest (ROE) showed a healthy improvement from 32.6% to 38.1%.

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.

Trading performance

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 of 27.2%.

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 UPDís wholesale business, up from 64% in 2008. UPDís distribution and export business grew by 47.9%. Good expense management and improved operating efficiencies contributed to a 12.0% increase in operating profit.

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 groupís 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 groupís earnings.

The group continues to be cash generative and R140 million has been committed to capital investment for the remainder of the year.

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.

Full-year earnings forecast

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 companyís auditors.