Press Releases

New Clicks headline earnings up 36% as core brands recover

Release Date: 2004/04/22

Cape Town – Listed retail group New Clicks Holdings increased headline earnings from continuing operations by 36% to R137,8 million in the six months to 29 February 2004. Diluted headline earnings per share from continuing operations rose by 26,1% to 38,2 cents per share.

Group leader Trevor Honneysett said New Clicks had delivered an overall improved financial performance, with the turnaround in its two core brands, Clicks and Discom, now well on track.

The group lifted turnover from continuing operations by 38,4% to R3,5 billion in the six month period. This performance was enhanced by the inclusion of New United Pharmaceutical Distributors (UPD), which was acquired by New Clicks with effect from 1 January 2003, for the full six months as opposed to two months in the corresponding reporting period. Comparable turnover growth, excluding UPD, was 11,3%.

Operating profit from continuing operations increased by 34% from R169,8 million to R227,5 million. Operating profit excluding UPD rose by 24,6%.

Expenses, excluding UPD, increased by 8,7%, being contained below the rate of growth in turnover for the six months.

New Clicks announced the sale of its wholly-owned subsidiary, New Clicks Australia (NCA), in January. The results of NCA have been incorporated in the New Clicks results for the four months to 31 December 2003, and have been reflected separately in the income statement as discontinued operations.

Honneysett said that in line with generally accepted accounting practice, the group has disclosed the financial performance from continuing operations to provide shareholders with a more meaningful basis of comparison for evaluating the performance of the business.

He said the trading performance of the operating brands had been most encouraging, particularly as inflation had declined markedly over the past year.

The group’s flagship brand Clicks increased turnover by 11,1%, with the lifestyle category showing the early signs of a comeback as a result of the improved homewares range. The health and beauty categories continued to show strong real growth. Increased sales of imported merchandise lifted the brand’s margin, which was a contributing factor in the 28,3% increase in operating profit.

Discom showed a 15,4% increase in turnover and made a long-awaited return to profitability. The brand turned a loss of R4,8 million in 2003 into a profit of R2,7 million. Discom recorded strong growth in fast moving consumer goods (FMCG) merchandise while reversing a five year downward trend in the sale of lifestyle merchandise.

Despite a 6,1% increase in turnover, the Music Division showed a R9 million decline in profit as the global slowdown in high margin CD sales affected the business.

“The division’s repositioning into broader entertainment merchandise is having a positive effect, with sales of gaming, DVDs and lifestyle products growing from 8,3% to 16,5% of sales. The strategy of moving into entertainment is expected to restore the performance of the division in the longer term,” he said.

The Body Shop showed a 31,1% increase in profit from its 21 stores nationally, and continues to improve cost control and stock turns.

UPD posted an operating profit of R28,6 million, which is 11,5% up on the corresponding period in the previous year. The wholesale distributor continues to increase turnover from independent pharmacies and the Purchase Milton & Associates (PM&A) group.

The group’s pharmacy ambitions were realised following the approval of the transfer of 33 licences from PM&A to Clicks. The first five Clicks Pharmacies were opened during March, with a further four planned for June/July. The performance of these five Clicks Pharmacies in the first six weeks of trading has been encouraging.

The performance of the PM&A group, which will be consolidated into New Clicks with effect from 1 March, remains disappointing. The main reason for this underperformance was the delay in integrating the chain into Clicks.

Discussing the group’s plans for the second half of the financial year, Honneysett said the focus will be on the integration of pharmacy into Clicks, the continued turnaround of the lifestyle category, the ongoing recovery in Discom and improving the performance of the music business.

Management is also committed to improving stock management, expense control and the completion of the implementation of the new financial systems.

“The outcome of the proposed single exit pricing legislation is likely to impact the group’s healthcare interests, but we are confident that our business model of developing an integrated channel to market for pharmacy will be sustainable in the long-term,” he said.

Ends
Issued by Tier 1 Investor Relations on behalf of the Clicks Group
For further information kindly contact
Graeme Lillie, Tier 1 Investor Relations 021 702 3102 / 082 468 1507