New Clicks holdings boosted by acquisition
Release Date: 2003/10/16
Cape Town – Multi-brand retail group, New Clicks Holdings, has increased turnover by 34% to R7,4 billion in the year to end August 2003, bolstered by the acquisition of New United Pharmaceutical Distributors (UPD) during the period.
The growth in turnover, excluding the impact of the acquisition, was a more modest 8%. This performance was negatively affected by declining sales in lifestyle merchandise in the Clicks and Discom brands, and the effect of the strengthening Rand on the results of New Clicks Australia (NCA).
Operating profit increased by 20% from R319 million to R382 million.
Headline earnings per share grew 26% to 65,6 cents per share, while diluted headline earnings per share showed a 30% rise to 64,5 cents per share. The increase is largely due to an impairment of R32,5 million of the loan to pharmacy group, Purchase Milton & Associates (PM&A), which was reflected in the 2002 figures. No further impairment was considered necessary in 2003.
Trevor Honneysett, group leader of New Clicks, said while the past year had been challenging for the business, it had also been highly positive with the announcement of legislative changes allowing for corporate pharmacy ownership.
“This legislation enables the group to translate its healthcare vision into reality, and introduce dispensaries into Clicks stores. We are now able to structure the business along the lines that it was originally conceived 35 years ago.”
The integration of the 80 pharmacies in the PM&A group into Clicks is underway and the first Clicks Pharmacy will be opened shortly.
Honneysett said the performance of the core Clicks brand was impacted by the disappointing lifestyle turnover, and despite strong real growth in both the beauty and health merchandise categories, sales growth was only 11,3%.
The Clicks leadership team under Lara Bryant has taken strong remedial action to reverse the decline in homewares by anticipating customer needs and focusing on the presentation of merchandise in its promotional campaigns. Initial indications are that the new homewares ranges are meeting customers’ expectations in respect of both value and quality, he said.
Discom continues its turnaround and despite not returning to profitability this year, reduced its operating loss from R20,6 million to R5,6 million. While sales of African beauty and hair care products showed strong growth, turnover was affected by a slowdown in homeware sales.
UPD’s profit contribution of R54,3 million for the eight months it has been in the New Clicks stable, is slightly ahead of expectations, and “a positive reinforcement of management’s confidence in the future of the division.”
The music division, consisting of Musica and CD Wherehouse, increased profit by 19,6%, despite tough trading conditions brought about by a slowdown in sales in the music industry.
The Body Shop increased its store base from 11 to 18 during the year, and showed a 93,5% growth in profit.
New Clicks Australia (NCA) experienced a difficult trading period and its contribution to the group’s headline earnings declined in Rand terms.
During the year NCA implemented its pharmacy strategy and opened seven Priceline pharmacies, with further stores planned for the new year.
Honneysett said a strategic decision had been made to operate the group’s South African and Australian divisions on an autonomous basis in future.
“Management structures spanning the two regions have been disbanded and the leadership teams have been given responsibility for their own strategy and implementation,” he said. “We have moved from the strategy phase and management is committed to focusing on implementation and delivery across the group.”
Discussing the prospects for the group, Honneysett said the introduction of the pharmacy offering, together with an improved lifestyle merchandise range, will lead to the emergence of Clicks as a pre-eminent healthcare brand.
“We have the opportunity to rejuvenate a 35 year old brand by introducing an entirely new category of merchandise in the form of healthcare. The upside potential in this market is enormous, but we are also realistic about what can be achieved and the challenges that still lie ahead of the group.”
“Discom is expected to return to profitability this year as the benefits of its restructuring and repositioning become evident.
“Based on the forecast performance of the group, the directors are confident that shareholders can expect continued real growth in earnings in the year ahead,” he added.