Strong real sales growth as New Clicks earnings up 28%
Release Date: 2008/10/23
Cape Town - New Clicks Holdings continued to experience resilient trading in a slowing consumer economy and generated strong real sales growth in the year ended 31 August 2008. Diluted headline earnings per share for the period increased by 28.1% to 131.9 cents.
Group chief executive, David Kneale, said the results highlighted the defensive nature of New Clicks, with all the group’s businesses strengthening their market position and showing market share gains over the year.
Turnover from continuing operations increased by 12.2% to R11.3 billion (2007: R10.1 billion), with selling price inflation of 3.9% for the year.
Turnover from the retail businesses of Clicks, Musica and The Body Shop rose by 11.6% and 9.2% on a comparable store basis, with price inflation of 3.8%. UPD, the group’s pharmaceutical distributor and wholesaler, lifted turnover by 13.3% and reported price inflation of 3.9%.
The retail operating margin improved from 5.4% to 6.1% while UPD’s margin was maintained at 3.2%, resulting in an overall increase in the margin to 5.2% (2007: 4.9%). The improved margin and higher turnover growth translated into a 19.9% increase in operating profit to R592 million.
The total distribution for the year was increased by 26.8% to 61.1 cents per share.
Kneale said the return on equity (ROE) increased from 24.7% to 32.8% as the group achieved all its medium-term financial targets. “The group’s ROE has more than doubled since 2005 while diluted headline earnings per share has shown a three-year compound growth rate of 32.0%,” he said.
On the trading performance, Kneale said Clicks continued its strong performance of recent years and increased turnover by 12.1%, with real sales growth of 8.2%.
“The key drivers of growth in Clicks were the health and beauty merchandise categories which grew 19.5% and 13.0% respectively, confirming both the defensive qualities of Clicks in a tough economic environment and that it has become the first choice health and beauty retailer.”
Pharmaceutical sales passed the R1 billion mark for the first time and Clicks increased its retail pharmacy market share from 9.3% to 10.7%. During the year Clicks opened its 150th pharmacy and extended its network to 157 following the opening of 32 new pharmacies.
UPD increased turnover by 13.3%, benefiting from the growth of the Link pharmacy buying group and increasing distribution business. Overall market share increased from 25.6% to 26.4%.
Musica increased turnover 7.7% as trading slowed in the second half. DVD sales grew 19.7% and gaming 26.2%, although CD sales declined 3.0%. Musica has made a successful transition from music to an entertainment business, with sales of non-music products increasing from 41% to 46% of total turnover for the year.
The 17.5% growth in turnover in The Body Shop was driven by new store openings and the Love Your Body loyalty programme.
After opening 32 new stores in the 2008 financial year, New Clicks plans to open 20 to 25 Clicks stores, 40 to 50 Clicks pharmacies, six Musica outlets and three stores for The Body Shop in the new financial year.
Discussing the group’s prospects, Kneale said the performance over the past year has shown that the group’s businesses are robust and well positioned in the current trading environment. Capital expenditure of R250 million has been committed for the year ahead.
“Retail trading for the first seven weeks of the new financial year has been satisfactory and in line with management’s expectations. In the absence of any marked deterioration in trading conditions, shareholders can expect continued real earnings growth in the 2009 financial year,” he added.