Resilient trading from New Clicks as earnings rise 26%
Release Date: 2008/04/24
Cape Town – Specialist retail group New Clicks Holdings increased diluted headline earnings per share by 25.8% to 67.8 cents in the six months to end February 2008, as the group experienced resilient trading and benefited from its share buy-back programme.
Headline earnings increased 12.0% from R188 million to R210 million. The results of Discom, the retail business sold at the start of the new financial year in September 2007, are included in the comparative period.
Shareholders will receive an interim distribution of 18.8 cents per share, an increase of 25.3% over 2007.
Group turnover from continuing operations increased by 13.1% to R5.64 billion, with inflation at 3.4% for the six month period. The combined turnover from the group’s retail businesses Clicks, Musica and The Body Shop increased by 10.9% and by 8.5% on a comparable store basis, against inflation of 3.7%.
UPD, the group’s wholesale pharmaceutical distributor, increased turnover by 13.6% and experienced inflation of 3.1% for the period.
Group chief executive, David Kneale, said New Clicks achieved real sales growth of close to 10% for the period, despite an overall slowdown in consumer spending in the country.
“This performance has been achieved not just in a tougher environment, but also while we have continued to invest in people, processes and stores for the long-term growth of the business,” he said.
The retail operating margin improved from 5.9% to 6.3% driven by Clicks, while UPD’s margin declined from 3.2% to a more normalised 2.8%. Operating profit increased 15.2% as a result of higher turnover and the improved margin management.
Inventory continued to be well managed, with stock levels increasing by only 4.9% against turnover growth of 13.1%.
Kneale said New Clicks has benefited from good trading and its ongoing focus on efficient cash and capital management to exceed its medium-term ROE target of 30% in the period.
On the trading performance, flagship brand Clicks increased turnover by 11.1%, showing real sales growth of 7.4%. The performance was attributable to sales growth of 16.8% in the health category and 13.5% in beauty merchandise, highlighting the defensive nature of Clicks in a tightening economy.
UPD grew turnover by 13.6%, boosted by increased sales to independent pharmacies as well as benefiting from new distribution contracts awarded during the period.
Entertainment specialist Musica experienced strong growth in DVD and gaming sales which contributed to a 8.5% increase in turnover. Musica continued to gain market share, despite a decline in CD sales during the period owing to a lack of popular new local releases.
The Body Shop grew turnover by 19.8%, supported by the success of the Love Your Body loyalty programme and new stores openings.
After opening 15 new stores and seven pharmacies in the first half, the group plans to open 10 Clicks stores and a further 24 dispensaries, nine Musica outlets and one store for The Body Shop in the remainder of the financial year. “By year end Clicks will have between 150 and 160 pharmacies nationally,” he added.
Discussing the group’s prospects, Kneale said the trading environment is expected to become more challenging with increasing pressures on consumer expenditure.
“However, New Clicks is primarily a defensive business which is proving fairly resilient in the current economic climate. Sales for the first two months of the new financial year have continued in line with the performance for the first half.”
Kneale said in the absence of any unforeseen factors in the macro-economy and any marked deterioration in the trading environment, New Clicks expects diluted headline earnings per share to increase by between 20% and 30% for the full financial year to 31 August 2008.