CLS: CLICKS GROUP LIMITED - Interim condensed consolidated results for the six months ended 29 February 2016

CLS: CLICKS GROUP LIMITED - Interim condensed consolidated results for the six months ended 29 February 2016

CLS: CLICKS GROUP LIMITED - Interim condensed consolidated results for the six months ended 29 February 2016 Interim condensed consolidated results for the six months ended 29 February 2016 CLICKS GROUP LIMITED Registration number: 1996/000645/06 Share code: CLS ISIN: ZAE000134854 CUSIP: 18682W205 INTERIM CONDENSED CONSOLIDATED RESULTS for the six months ended 29 February 2016 Group turnover up 13.4% Diluted headline EPS up 15.1% Interim dividend up 16.0% Return on equity of 53.1% COMMENTARY OVERVIEW Clicks Group performed well against a backdrop of constrained consumer spending, increasing financial pressures and growing economic uncertainty in the country. The group's retail businesses produced excellent trading performances, particularly over the festive and holiday season. Customers responded positively to the strong value offer and innovative product ranges which resulted in good volume growth and increased market shares across all core merchandise categories. Diluted headline earnings per share (HEPS) for the half-year increased by 15.1% to 204.4 cents and the interim dividend was increased by 16.0% to 76.0 cents per share. FINANCIAL PERFORMANCE Group turnover increased by 13.4% to R12.1 billion, with retail sales growing by 13.4% and UPD by 12.8%. Selling price inflation was contained to 4.4% for the period. Total income increased by 12.3%. The investment in competitive pricing in Clicks and the faster growth in generic medicines in UPD reduced the group's total income margin by 20 basis points to 26.1%. The increase in retail operating expenses of 11.7% was contained below sales growth despite the investment in stores, pharmacies and marketing costs. UPD expenses grew by 12.9% and by 8.0% on a comparable basis. Operating profit grew by 14.4% to R732 million with the operating margin increasing 10 basis points to 6.1%, benefiting from the stronger retail growth. Inventory days in stock moved from 71 to 73 days, with inventory levels 17.1% higher at the end of February owing to the investment in stock by all businesses ahead of supplier price increases. The group remains highly cash-generative. Cash inflow from operations before working capital changes rose 11% to R888 million. Almost R700 million was returned to shareholders through dividend payments of R406 million and share buy-backs of R290 million. Capital expenditure of R203 million was invested during the first half, mainly on new stores and pharmacies, refurbishments and IT systems. The group's performance translated into a sector-leading return on equity of 53.1%. TRADING PERFORMANCE Retail health and beauty sales, including Clicks and the franchise brands of The Body Shop, GNC and Claire's, increased by 14.1%, with strong performances in all product categories. The Clicks store footprint was expanded to 496, with 384 pharmacies. This is supported by 60 standalone health and beauty franchise stores. ClubCard membership increased by almost one million following the successful relaunch of the loyalty programme last year, bringing total membership to 5.7 million active customers. UPD grew turnover by 12.8%, driven partly by the earlier implementation of the annual increase in the single exit price (SEP) of medicines which resulted in customers buying in stock ahead of manufacturer's price increases. OUTLOOK Clicks Group is well positioned for continued growth despite the weakening outlook for consumer spending in the months ahead. The core health and beauty markets in which the group trades are relatively resilient to economic downturns, with the strong value proposition of the Clicks brand appealing to consumers. Clicks also has considerable scope to expand its store and pharmacy footprint in South Africa. The group continues to invest for long-term growth and record levels of capital expenditure of R455 million will be invested in the financial year. FULL-YEAR EARNINGS FORECAST The directors forecast that diluted HEPS for the financial year ending 31 August 2016 will increase by between 10% and 15% over the 2015 financial year. The forecast is based on the following key assumptions: the consumer spending environment will become increasingly challenging in the second half of the financial year; selling price inflation will be between 4% and 5% for the year; and the group will continue to invest for longer-term growth, mainly in new stores and pharmacies. Shareholders are advised that this forecast has not been reviewed or reported on by the group's independent auditor. INTERIM DIVIDEND The board of directors has approved an interim gross ordinary dividend for the period ended 29 February 2016 of 76.0 cents per share (2015: 65.5 cents per share). The source of the dividend will be from distributable reserves and paid in cash. ADDITIONAL INFORMATION Dividends Tax (DT) amounting to 11.4 cents per ordinary share will be withheld in terms of the Income Tax Act. Ordinary shareholders who are not exempt from DT will therefore receive a dividend of 64.6 cents net of DT. The company has 246 137 763 ordinary shares and 29 153 295 ordinary 'A' shares in issue. Its income tax reference number is 9061/745/71/8. Shareholders are advised of the following salient dates in respect of the interim dividend: Last day to trade 'cum' the dividend Friday, 24 June 2016 Shares trade 'ex' the dividend Monday, 27 June 2016 Record date Friday, 1 July 2016 Payment to shareholders Monday, 4 July 2016 Share certificates may not be dematerialised or rematerialised between Monday, 27 June 2016 and Friday, 1 July 2016, both days inclusive. The directors of the company have determined that dividend cheques amounting to R50.00 or less due to any ordinary shareholder will not be paid unless a written request to the contrary is delivered to the transfer secretaries, Computershare Investor Services Proprietary Limited, by no later than close of business on Friday, 24 June 2016, being the day the shares trade 'cum' the dividend. Unpaid dividend cheques will be aggregated with other such amounts and donated to a charity to be nominated by the directors. By order of the board David Janks Company Secretary 21 April 2016 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME R'000 Six months to Six months to Year to 29 February 28 February 31 August 2016 2015 % 2015 (unaudited) (unaudited) change (audited) Revenue 12 704 866 11 200 717 13.4 23 285 096 Turnover 12 093 347 10 664 306 13.4 22 070 092 Cost of merchandise sold (9 545 841) (8 388 559) 13.8 (17 545 318) Gross profit 2 547 506 2 275 747 11.9 4 524 774 Other income 608 103 533 194 14.0 1 210 082 Total income 3 155 609 2 808 941 12.3 5 734 856 Expenses (2 423 410) (2 168 825) 11.7 (4 338 817) Depreciation and amortisation (121 900) (117 077) 4.1 (237 670) Occupancy costs (340 526) (307 943) 10.6 (619 023) Employment costs (1 244 372) (1 115 787) 11.5 (2 255 417) Other costs (716 612) (628 018) 14.1 (1 226 707) Operating profit 732 199 640 116 14.4 1 396 039 Loss on disposal of property, plant and equipment (3 098) (4 082) (24.1) (9 446) Profit before financing costs 729 101 636 034 14.6 1 386 593 Net financing costs (18 182) (24 740) (26.5) (57 309) Financial income 3 416 3 217 6.2 4 922 Financial expense (21 598) (27 957) (22.7) (62 231) Profit before taxation 710 919 611 294 16.3 1 329 284 Income tax expense (201 913) (172 701) 16.9 (374 709) Profit for the period 509 006 438 593 16.1 954 575 Other comprehensive income: Items that will not be subsequently reclassified to profit or loss - - 765 Remeasurement of post-employment benefit obligations - - 1 063 Deferred tax on remeasurement - - (298) Items that may be subsequently reclassified to profit or loss Exchange differences on translation of foreign subsidiaries 6 522 760 4 777 Cash flow hedges (109) 27 808 33 238 Change in fair value of effective portion (151) 38 622 46 164 Deferred tax on movement of effective portion 42 (10 814) (12 926) Other comprehensive income for the period, net of tax 6 413 28 568 38 780 Total comprehensive income for the period 515 419 467 161 993 355 Earnings per share (cents) 213.3 182.2 17.1 396.7 Diluted earnings per share (cents) 203.5 176.4 15.4 381.5 HEADLINE EARNINGS RECONCILIATION R'000 Six months to Six months to Year to 29 February 28 February 31 August 2016 2015 % 2015 (unaudited) (unaudited) change (audited) Total profit for the period 509 006 438 593 954 575 Adjusted for: Loss net of tax on disposal of property, plant and equipment 2 230 2 939 6 801 Insurance recovery income net of tax on property, plant and equipment - - (921) Headline earnings 511 236 441 532 15.8 960 455 Headline earnings per share (cents) 214.2 183.5 16.7 399.2 Diluted headline earnings per share (cents) 204.4 177.6 15.1 383.9 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION R'000 As at As at As at 29 February 28 February 31 August 2016 2015 2015 (unaudited) (unaudited) (audited) Non-current assets 2 165 828 1 938 555 2 009 163 Property, plant and equipment 1 284 961 1 150 461 1 221 658 Intangible assets 405 020 376 942 395 625 Goodwill 103 510 103 510 103 510 Deferred tax assets 195 123 195 165 177 037 Investment in associate 19 666 - - Loans receivable 13 246 12 755 13 003 Financial assets at fair value through profit and loss 19 946 17 248 16 668 Derivative financial assets 124 356 82 474 81 662 Current assets 6 210 054 4 936 252 5 546 775 Inventories 3 708 736 3 166 137 3 249 914 Trade and other receivables 2 248 338 1 703 176 1 871 616 Cash and cash equivalents 227 888 61 154 400 738 Derivative financial assets 25 092 5 785 24 507 Total assets 8 375 882 6 874 807 7 555 938 Equity and liabilities Total equity 1 889 767 1 701 782 2 012 807 Non-current liabilities 316 058 310 188 308 503 Employee benefits 124 839 133 274 128 035 Operating lease liability 186 553 176 914 180 468 Financial liability held at fair value through profit and loss 4 666 - - Current liabilities 6 170 057 4 862 837 5 234 628 Trade and other payables 5 730 139 4 477 930 4 898 114 Employee benefits 165 841 138 635 214 943 Provisions 5 745 8 845 5 745 Interest-bearing borrowings 200 800 181 500 - Income tax payable 66 340 54 588 115 826 Derivative financial liabilities 1 192 1 339 - Total equity and liabilities 8 375 882 6 874 807 7 555 938 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS R'000 Six months to Six months to Year to 29 February 28 February 31 August 2016 2015 2015 (unaudited) (unaudited) (audited) Operating profit before working capital changes 888 782 800 243 1 699 743 Working capital changes (47 224) (248 908) (15 451) Net interest paid (13 025) (20 984) (39 025) Taxation paid (242 258) (201 649) (355 520) Cash inflow from operating activities before dividends paid 586 275 328 702 1 289 747 Dividends paid to shareholders (406 051) (333 124) (490 758) Net cash effects from operating activities 180 224 (4 422) 798 989 Net cash effects from investing activities (218 556) (147 962) (369 381) Capital expenditure (203 437) (147 753) (369 547) Other investing activities (15 119) (209) 166 Net cash effects from financing activities (134 518) 17 907 (224 501) Purchase of treasury shares (290 171) (115 356) (176 264) Acquisition of derivative financial assets (45 147) (48 237) (48 237) Interest-bearing borrowings raised 200 800 181 500 - Net (decrease)/increase in cash and cash equivalents (172 850) (134 477) 205 107 Cash and cash equivalents at the beginning of the period 400 738 195 631 195 631 Cash and cash equivalents at the end of the period 227 888 61 154 400 738 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY R'000 Six months to Six months to Year to 29 February 28 February 31 August 2016 2015 2015 (unaudited) (unaudited) (audited) Opening balance 2 012 807 1 566 973 1 566 973 Purchase of treasury shares (290 171) (115 356) (176 264) Dividends paid to shareholders (406 051) (333 124) (490 758) Total comprehensive income for the period 515 419 467 161 993 355 Share-based payment reserve movement 57 763 116 128 119 501 Total 1 889 767 1 701 782 2 012 807 Dividend per share (cents) Interim declared/paid 76.0 65.5 65.5 Final paid - - 169.5 76.0 65.5 235.0 SEGMENTAL ANALYSIS The group's reportable segments under IFRS 8 are Retail and Distribution. R'000 Profit before Total Capital Total Turnover taxation assets expenditure liabilities Six months to 29 February 2016 (unaudited) Retail 8 263 200 623 516 3 969 322 172 547 2 672 891 Distribution 5 436 703 114 304 5 429 748 6 003 4 272 078 Inter-segmental (1 606 556) (5 621) (2 257 612) - (2 226 633) Total reportable segmental balance 12 093 347 732 199 7 141 458 178 550 4 718 336 Non-reportable segmental balance - (21 280) 1 234 424 24 887 1 767 779 Total group balance 12 093 347 710 919 8 375 882 203 437 6 486 115 Six months to 28 February 2015 (unaudited) Retail 7 288 484 533 652 3 414 906 113 437 2 385 023 Distribution 4 820 087 111 931 4 108 180 14 447 3 173 945 Inter-segmental (1 444 265) (5 467) (1 659 158) - (1 643 482) Total reportable segmental balance 10 664 306 640 116 5 863 928 127 884 3 915 486 Non-reportable segmental balance - (28 822) 1 010 879 19 869 1 257 539 Total group balance 10 664 306 611 294 6 874 807 147 753 5 173 025 Twelve months to 31 August 2015 (audited) Retail 14 757 724 1 150 684 3 475 535 280 322 2 386 819 Distribution 10 415 301 258 578 4 698 119 27 758 3 635 137 Inter-segmental (3 102 933) (13 223) (1 973 273) - (1 947 914) Total reportable segmental balance 22 070 092 1 396 039 6 200 381 308 080 4 074 042 Non-reportable segmental balance - (66 755) 1 355 557 61 467 1 469 089 Total group balance 22 070 092 1 329 284 7 555 938 369 547 5 543 131 R'000 As at As at As at 29 February 28 February 31 August 2016 2015 2015 (unaudited) (unaudited) (audited) Non-reportable segmental profit before taxation consists of: Loss on disposal of property, plant and equipment (3 098) (4 082) (9 446) Financial income 3 416 3 217 4 922 Financial expense (21 598) (27 957) (62 231) (21 280) (28 822) (66 755) SUPPLEMENTARY INFORMATION As at As at As at 29 February 28 February 31 August 2016 2015 2015 (unaudited) (unaudited) (audited) Number of ordinary shares in issue (gross) ('000) 246 138 246 138 246 138 Number of ordinary shares in issue including 'A' shares issued in terms of employee share ownership programme (gross) ('000) 275 291 275 291 275 291 Number of ordinary shares in issue (net of treasury shares) ('000) 236 524 240 572 239 884 Weighted average number of shares in issue (net of treasury shares) ('000) 238 624 240 669 240 603 Weighted average diluted number of shares in issue (net of treasury shares) ('000) 250 110 248 652 250 204 Number of ordinary shares purchased ('000) 3 360 1 688 2 376 Net asset value per share (cents) 799 707 839 Net tangible asset value per share (cents) 584 508 631 Depreciation and amortisation (R'000) 127 517 122 127 248 054 Capital expenditure (R'000) 203 437 147 753 369 547 Capital commitments (R'000) 251 300 231 200 432 300 ACCOUNTING POLICIES AND NOTES 1.1 These condensed consolidated financial results for the six months ended 29 February 2016 have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards ('IFRS') and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 - Interim Financial Reporting. The information contained in the interim report has neither been audited nor reviewed by the group's external auditors. These condensed consolidated financial results have been prepared under the supervision of M Fleming CA(SA), the Chief Financial Officer of the group. The accounting policies used in the preparation of the financial results for the six months ended 29 February 2016 are in terms of IFRS and are consistent with those applied in the Audited Financial Statements for the year ended 31 August 2015. 1.2 Related party transactions for the current year are similar to those disclosed in the group's annual financial statements for the year ended 31 August 2015. No significant related party transactions arose during the current year. 1.3 There were no material business combinations during the period under review. The only acquisition was a 25% interest in Sorbet Branding Proprietary Limited. The contribution of this acquisition to profit for the period under review was not material. 1.4 Under the general authorities granted by shareholders, 3 360 470 shares were repurchased during the current year. 1.5 The carrying value of all financial instruments approximates fair value. All financial instruments are held at amortised cost, with the exception of derivative instruments that are accounted for at fair value through profit or loss. The fair value of financial instruments that are not traded in active markets are determined by using valuation techniques; if all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. All financial instruments accounted for at fair value through profit or loss are considered to be level 2 investments and there have been no transfers between levels 1, 2 and 3 during the year. 1.6 The majority of the non-current derivative financial assets are to hedge obligations under the cash-settled share compensation scheme. Registered address: Cnr Searle and Pontac Streets, Cape Town 8001. PO Box 5142, Cape Town 8000 Directors: DM Nurek* (Chairman), F Abrahams*, JA Bester*, BD Engelbrecht, M Fleming (Chief Financial Officer), F Jakoet*, DA Kneale# (Chief Executive Officer), NS Matlala*, M Rosen* * Independent non-executive # British Company secretary: DW Janks Registration number: 1996/000645/06 Income tax number: 9061/745/71/8 Share code: CLS ISIN: ZAE000134854 CUSIP: 18682W205 Transfer secretaries: Computershare Investor Services Proprietary Limited 70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107 Sponsor: Investec Bank Limited www.clicksgroup.co.za Date: 21/04/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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2016-04-21 08:00:00 Source: JSE News Service (SENS)