Notes to the Financial Statements

for the year ended 31 August 2005

Group

2005

2004

Accumulated

Book

Accumulated

Book

Cost

depreciation

value

Cost

depreciation

value

R'000

R'000

1 Property, plant and equipment

Land and buildings – freehold

299 080

26 121

272 959

299 451

21 098

278 353

Furniture, equipment and vehicles

917 994

482 058

435 936

781 329

400 335

380 994

1 217 074

508 179

708 895

1 080 780

421 433

659 347

A register of land and buildings containing the required statutory information is available for inspection on request at the registered office of the company.
All group property is owner-occupied and there are no significant investment properties held.
Land and buildings with a carrying value of R42.5 million are encumbered under a mortgage loan as detailed in note 13.
Furniture, equipment and vehicles with a carrying value of R4.5 million are encumbered under a finance lease arrangement as detailed in note 13.
The carrying amount of the group property, plant and equipment can be reconciled as follows:
		Furniture,
	Land and buildings	equipment
	– freehold	and vehicles	Total
	R'000	R'000	R'000
Carrying amount at 1 September 2003	280 001	467 262	747 263
Additions	555	159 794	160 349
Acquisition of subsidiaries and businesses (see note 35.3)	2 823	27 112	29 935
Disposals	–	(7 041)	(7 041)
Disposal of subsidiaries and businesses (see note 35.4)	–	(153 105)	(153 105)
Impairment	–	(13 496)	(13 496)
Exchange rate adjustment	–	3 813	3 813
Depreciation	(5 026)	(103 345)	(108 371)
Carrying amount at 31 August 2004	278 353	380 994	659 347
Additions	–	170 106	170 106
Disposals	(350)	(16 124)	(16 474)
Depreciation	(5 044)	(99 040)	(104 084)
Carrying amount at 31 August 2005	272 959	435 936	708 895


		Group
		2005	2004
		R'000	R'000
2	Trademark
	Balance at the beginning of the year	3 930	4 580
	Amortisation	(650)	(650)
	Balance at the end of the year	3 280	3 930
	Comprising:
	Cost	6 880	6 880
	Accumulated amortisation	3 600	2 950
	Balance at the end of the year	3 280	3 930
	The trademark relates to The Link Investment Trust. The estimated remaining useful life is five years.

3	Goodwill
	Balance at the beginning of the year	98 280	235 288
	Acquisition of subsidiaries and businesses (see note 35.3)	–	420 447
	Additional goodwill payments	2 484	–
	Amortisation	–	(16 272)
	Disposal of subsidiaries and businesses (see note 35.4)	–	(128 788)
	Exchange rate adjustment	–	7 849
	Goodwill on franchise acquisition	–	203
	Impairment	(16 814)	(258 196)
	Impairment of loan prior to acquisition	–	(162 251)
	Balance at the end of the year	83 950	98 280
	Net goodwill comprises:
	The Link Investment Trust	–	14 330
	UPD	83 950	83 950
		83 950	98 280
	The additional goodwill acquired during the year related to further payments made to the sellers of two pharmacies acquired by PM&A in earlier years. The payments were made in accordance with the original sale agreements.


		Company		Group
		2005	2004	2005	2004
		R'000	R'000	R'000	R'000
4	Deferred taxation
	Deferred taxation assets	557	–	102 264	95 475
	Deferred taxation liabilities	–	–	(24 750)	(19 623)
		557	–	77 514	75 852
	Balance at the beginning of the year	–	6 644	75 852	86 497
	Acquisition of subsidiaries and businesses (see note 35.3)	–	–	–	2 065
	Capital gains taxation – revaluation of shares	–	–	(8 054)	(4 806)
	Disposal of subsidiaries and businesses (see note 35.4)	–	(5 000)	–	(14 803)
	Exchange rate adjustment	–	–	–	1 785
	Impairment of loan to PM&A	–	–	–	11 941
	Income and expense accrual	–	–	1 135	28 433
	Operating lease accrual	–	–	1 860	2 560
	Property, plant and equipment	–	–	(4 656)	(20 774)
	Reversal of impairment of loan to PM&A	–	–	–	(48 675)
	Taxation losses	557	(1 644)	20 367	40 929
	Trademark	–	–	(8 990)	(9 300)
	Balance at the end of the year	557	–	77 514	75 852
	Arising as a result of:
	Capital gains taxation – revaluation of shares	–	–	(17 444)	(9 390)
	Income and expense accrual	–	–	15 477	14 342
	Operating lease accrual	–	–	24 806	22 946
	Property, plant and equipment	–	–	(31 530)	(26 874)
	Taxation losses	557	–	67 295	46 928
	Trademark	–	–	18 910	27 900
	Balance at the end of the year	557	–	77 514	75 852
	The capital gains deferred taxation liability arises on the revaluation of forward purchases of shares by certain subsidiary companies in other subsidiary companies.
	Deferred taxation assets of R73.7 million relating to four subsidiary companies, Purchase Milton & Associates (Proprietary) Limited, Milton & Associates (Proprietary) Limited, J&G Purchase & Associates (Proprietary) Limited and Leon Katz (Proprietary) Limited are included in total deferred taxation assets. These subsidiary companies incurred losses for the year. Included in the deferred taxation assets relating to these subsidiary companies, is an amount of R65.6 million in respect of aggregate computed taxation losses of R226.2 million. The group is in the process of restructuring the operations of certain of its subsidiary companies in order to comply with Pharmacy Regulations. The directors consider that, consequent on this restructuring, sufficient future taxable income will be generated by these subsidiary companies to utilise the deferred taxation assets recognised.
	In respect of the deferred taxation assets raised relating to other subsidiary companies, the directors consider that sufficient future taxable income will be generated by those subsidiary companies to utilise the deferred taxation assets recognised.

Company

2005

2004

R'000

R'000

5 Unlisted investment

2 600 redeemable cumulative non-participating preference shares at 9.32% in Sechold Finance Services (Proprietary) Limited

260 000

260 000

The directors' valuation of the investment at 31 August 2005 is R260 million.

Unrecognised financial asset

In the group financial statements, in terms of the accounting policy for financial instruments, the group has not recognised the following financial asset:

New Clicks Holdings Limited ("NCH") purchased a R260 million preference share investment which carries a 9.32% dividend coupon rate and is redeemable on 22 August 2008. For security of NCH's preference share investment, the finance company referred to in note 30 has pledged its loan receivable from a subsidiary of NCH in the event of a default in terms of the preference share arrangement. For security of the subsidiary company's loan, NCH has pledged its preference share investment to the finance company in the event of default of the loan.

This unrecognised financial asset is offset by the unrecognised financial liability reflected in note 13.

The dividend received of R24.2 million (2004: R24.2 million) has been offset against interest paid on the unrecognised financial liability reflected in note 13.

Group

2005

2004

R'000

R'000

6 Loans

Amount owing by New Clicks Foundation (see note 6.1)

5 021

5 021

Amount owing by Intercare Managed Healthcare (Proprietary) Limited (see note 6.2)

47 707

21 433

52 728

26 454

6.1	The loan to New Clicks Foundation is unsecured, interest free and no fixed date for repayment has been determined.
6.2	The loan to Intercare Managed Healthcare (Proprietary) Limited ("Intercare") is partially secured by way of a general notarial bond over moveable assets and bears interest at the prime overdraft interest rate as charged by the group's bankers from time to time. Repayments are made from time to time.
	Intercare is a former subsidiary of the group engaged in the business of providing facilities and support services for medical and dental practitioners and currently operates out of five separate locations. In terms of the sale agreement, the group was committed to fund certain financial commitments existing at the time of the disposal.
	In addition to the loan, the group leases certain properties which are in turn sub-leased to Intercare. These commitments are included in the lease commitments disclosed in note 26.


7	Inventories
	Goods for resale – cost		1 617 685	1 409 124
	Goods in transit – cost		4 195	1 122
	Consumables		–	1 093
			1 621 880	1 411 339

8	Accounts receivable
	The following are included in accounts receivable:
	Trade debtors
	Gross trade debtors		422 340	326 478
	Provision for doubtful debts		(51 063)	(43 721)
	Total trade debtors		371 277	282 757
	Short-term derivative instruments
	Balance at the beginning of the year		2 422	–
	Realised gain on forward exchange contracts		(1 654)	–
	Realised gain on interest rate swap contracts		(768)	–
	Unrealised gain on forward exchange contracts		–	1 654
	Unrealised gain on interest rate swap contracts		304	768
	Total short-term derivative instruments		304	2 422
	Share Trust loans with participants		15 414	17 281
	Prepayments		28 247	31 427
	Other income accruals		69 423	80 315
	Other		9 850	29 560
			494 515	443 762
	The Share Trust loans with participants are interest free and secured by the shares in NCH issued to participants, delivery of which is delayed in terms of the rules of the scheme (see note 32).
	Prepayments include payments to foreign suppliers in advance of import purchases being received and payments in respect of certain capital items not yet completed and capitalised.

9	Derivative
	Balance at the beginning of the year		–	–
	Purchase of hedging instrument		18 390	–
	Change in fair value recognised in income		(3 945)	–
	Balance at the end of the year		14 445	–
	The derivative serves as a partial hedge in respect of the group's obligation in terms of share appreciation rights granted and available to be granted to employees as more fully described in note 17.1.
	The derivative has been valued by an independent external valuator.

10	Share capital and share premium – group and company
	Authorised
	600 million (2004: 600 million) ordinary shares of one cent each		6 000	6 000
	Issued ordinary shares and premium
	370.260 million (2004: 361.205 million) ordinary shares of one cent each		3 703	3 612
	Share premium – group		964 077	907 107
	Share premium – company		966 197	909 227
	The unissued shares are under the control of the directors until the next annual general meeting, subject to an undertaking by the directors that such authority will only be used to issue shares in terms of the company's obligations under the staff share option scheme.
	Preliminary expenses of R2.1 million were written off against the share premium of a subsidiary company on the acquisition of certain businesses in 1996.

11	Treasury shares
	Of the shares in issue, the group holds the following as treasury shares:
	Shares purchased by a subsidiary – 26.932 million (2004: 13.005 million) ordinary shares of one cent each – cost		226 874	100 177
	Shares held by the Share Trust – 2.809 million (2004: 2.809 million) ordinary shares of one cent each – cost		22 804	22 804
			249 678	122 981

12	Non-distributable reserves
	Non-distributable reserves comprise:
	Deferred taxation on write-off of trademarks		17 980	27 900
	Unrealised gain on the translation of assets and liabilities denominated in foreign currencies		508	1 042
			18 488	28 942

13	Loans payable
	Secured loans bearing interest at fixed rates
	Interest rate	Date repayable
	16.15% per annum	February 2006	11 561	20 414
	16.92% per annum	February 2006	1 164	3 281
	18.45% per annum	October 2006	9 053	15 554
	15.41% per annum	August 2010	61 200	68 856
	Total secured loans bearing interest at fixed rates		82 978	108 105
	These loans are secured by a pledge of shares in certain property-owning subsidiaries.
	Loan – bearing interest at prime less 1% per annum, repayable by August 2010		18 709	19 630
	This loan is secured by a mortgage over certain property (see note 1).
	Non-current portion of finance leases, repayable over the next three years		3 997	4 944
	These lease liabilities are secured by the related leased items (see note 1).
	Unsecured loan – bearing interest at JIBAR plus 2.2% per annum, repayable by August 2006		20 278	37 618
	Unsecured loan – bearing interest at a fixed 11.65% per annum, repayable by August 2008		134 745	170 252
	Total loans payable		260 707	340 549
	Short-term portion included in current liabilities		(93 024)	(80 819)
	Non-current loans payable		167 683	259 730
	*Unrecognised financial liability*
	In the group financial statements, in terms of the accounting policy for financial instruments, the group has not recognised the following financial liability:
	A subsidiary has entered into a loan arrangement with a finance company in terms of which the subsidiary borrowed R260 million. The loan is repayable in August 2008 and interest is payable at 11.65% nominal rate per annum, compounded monthly. This unrecognised financial liability is offset by the unrecognised financial asset reflected in note 5.
	Interest paid of R24.2 million (2004: R24.2 million) has been offset against dividends received on the unrecognised financial asset reflected in note 5.

14	Operating lease accrual
	Balance at the end of the year		85 506	76 488
	The operating lease accrual is raised in accordance with AC105 as detailed in note 25, and represents the difference between operating lease cash payments and the operating lease expense recognised in the income statement on the straight-line basis.

15	Short-term borrowings
	Bank overdrafts		13 903	8 710

16	Borrowing powers
	In terms of the articles of association, the borrowing powers of the company are unlimited.

17	Accounts payable and accruals
	The following are included in accounts payable and accruals:
	Trade creditors		1 321 101	1 200 268
	Leave pay accrual
	Balance at the beginning of the year		32 902	39 855
	Acquisition of subsidiaries and businesses		–	6 129
	Disposal of subsidiaries and businesses		–	(18 721)
	Income statement movement		2 567	5 639
	Balance at the end of the year		35 469	32 902
	Post-retirement medical benefit liability (see note 29)
	Balance at the beginning of the year		18 331	16 900
	Income statement movement		1 542	1 431
	Balance at the end of the year		19 873	18 331
	Short-term derivative instruments
	Balance at the beginning of the year		–	4 272
	Realised loss on forward exchange contracts		–	(4 272)
	Unrealised loss on forward exchange contracts		2 500	–
	Balance at the end of the year		2 500	–
	Share appreciation rights obligation (see note 17.1)
	Balance at the beginning of the year		–	–
	Income statement movement		662	–
	Balance at the end of the year		662	–
	Bonus accrual		12 162	10 839
	ClubCard discount accrual		18 009	14 306
	Gift voucher accrual		4 779	4 543
	Other		37 158	108 895
			1 451 713	1 390 084


17.1	*Share appreciation rights obligation*
	During the year the group implemented an incentive programme whereby six million share appreciation rights were made available to certain employees. Three million of these rights vest after a period of three years and the remaining three million vest after a period of five years. The "exercise price" of the share appreciation rights varies depending on the performance of the share price as detailed below.
		Share price
		on vesting date (R)	"Exercise price" (R)
	Three-year rights	greater than 12.71	8.36
		greater than 14.45	4.18
		greater than 16.33	0.01
	Five-year rights	greater than 16.81	8.36
		greater than 20.80	4.18
		greater than 25.51	0.01
	At year-end the group had granted 1 900 000 rights for each of the three-year and five-year periods.
	As the group's liability in respect of these share appreciation rights is dependent on the future performance of the company's share price, a derivative hedge has been acquired to limit the extent of the exposure. The hedging instrument covers all exposure where the notional exercise price is R4.18 or above. In addition to the cost of the hedge detailed in note 9, in the event that all available rights are granted and the highest target share price is achieved, the group's maximum further exposure in terms of the share appreciation rights is R25.0 million.

Group

2005

2004

R'000

R'000

18 Occupancy costs

Lease charges

Operating leases – cash payments

282 391

299 555

Operating lease accrual (see note 25)

9 018

8 534

291 409

308 089

Continuing

Discontinued

operations

2005

2004

2005

2004

R'000

R'000

R'000

R'000

Lease charges

Operating leases – cash payments

282 391

236 701

–

62 854

Operating lease accrual (see note 25)

9 018

8 534

–

291 409

245 235

–

62 854


				Group
				2005	2004
				R'000	R'000
19	Employment costs
	Directors' emoluments			18 887	23 254
	Non-executive			1 901	5 487
	Fees			1 026	789
	Consulting services			875	780
	Other – Australia			–	3 918
	Executive			16 986	17 767
	Salary and bonus			5 166	6 900
	Other benefits			7 386	2 913
	Other – Australia			4 434	7 954

	Deducted from proceeds from sale of NCA			–	(11 872)
				18 887	11 382
	Share appreciation rights obligation (see note 17.1)			662	–
	Other staff remuneration			827 233	819 129
				846 782	830 511
		Continuing		Discontinued
		operations		operations
		2005	2004	2005	2004
		R'000	R'000	R'000	R'000
	Directors' emoluments	18 887	9 917	–	13 337
	Non-executive	1 901	1 569	–	3 918
	Fees	1 026	789	–	–
	Consulting services	875	780	–	–
	Other – Australia	–	–	–	3 918
	Executive	16 986	8 348	–	9 419
	Salary and bonus	5 166	5 701	–	1 199
	Other benefits	7 386	2 647	–	266
	Other – Australia	4 434	–	–	7 954

	Deducted from proceeds from sale of NCA	–	–	–	(11 872)
		18 887	9 917	–	1 465
	Share appreciation rights obligation (see note 17.1)	662	–	–	–
	Other staff remuneration	827 233	709 953	–	109 176
		846 782	719 870	–	110 641
	For further detail of directors' emoluments refer to the Corporate Governance Report.


				Group
				2005	2004
				R'000	R'000
20	Other operating costs
	Auditors' remuneration			3 006	3 330
	Audit fees			2 994	3 071
	Other services and expenses			12	259
	Fair value adjustment – derivative (see note 9)			3 945	–
	Fees paid for outside services
	Technical services			13 368	10 405
	Net foreign exchange losses – realised			2 539	9 498
	Net foreign exchange losses/(gains) – unrealised			2 500	(1 654)
	Other expenses			625 414	583 966
				650 772	605 545
		Continuing		Discontinued
		operations		operations
		2005	2004	2005	2004
		R'000	R'000	R'000	R'000
	Auditors' remuneration	3 006	2 992	–	338
	Audit fees	2 994	2 878	–	193
	Other services and expenses	12	114	–	145
	Fair value adjustment – derivatives (see note 9)	3 945	–	–	–
	Fees paid for outside services
	Technical services	13 368	9 818	–	587
	Net foreign exchange losses – realised	2 539	9 498	–	–
	Net foreign exchange losses/(gains) – unrealised	2 500	(1 654)	–	–
	Other expenses	625 414	521 575	–	62 391
		650 772	542 229	–	63 316


		Company		Group
		2005	2004	2005	2004
		R'000	R'000	R'000	R'000
21	Taxation
	South African normal taxation
	Current taxation
	Current year	–	1 360	76 549	78 252
	Prior year underprovision	662	1 748	702	757
	Secondary Taxation on Companies
	Current year	10 994	9 325	10 994	9 325
	Deferred taxation
	Current year	(557)	1 568	(3 720)	2 281
	Prior year under/(over)provision	–	76	–	(1 993)
	Change in taxation rate	–	–	1 597	–
	Foreign taxation
	Current taxation
	Current year	–	–	2 101	16 451
	Prior year underprovision	–	–	–	390
	Withholding taxation
	Current year	–	464	–	464
	Deferred taxation
	Current year	–	–	(469)	(596)
		11 099	14 541	87 754	105 331
	*Reconciliation of rate of taxation (%)*
	Standard rate – South Africa	29.00	30.00	29.00	30.00
	Adjusted for:
	Capital gains taxation	–	–	(2.11)	6.21
	Change in taxation rate	–	–	0.55	–
	Disallowable expenditure	0.05	0.04	2.57	61.90
	Exempt income and allowances	(29.41)	(28.82)	(4.96)	(30.51)
	Foreign taxation rate variations	–	–	0.09	0.05
	Foreign withholding taxation	–	0.19	–	0.54
	Goodwill amortisation and impairment	–	–	1.67	95.08
	Prior year under/(over)provision	0.43	0.76	0.02	(0.98)
	Recognition of computed taxation losses not previously recognised	–	–	–	(58.10)
	Secondary Taxation on Companies	7.13	3.89	3.76	10.74
	Taxation losses (utilised)/carried forward	–	–	(0.33)	0.16
	Other	–	–	(0.25)	6.25
	Effective taxation rate	7.20	6.06	30.01	121.34
		Continuing		Discontinued
		operations		operations
		2005	2004	2005	2004
		R'000	R'000	R'000	R'000
	South African normal taxation
	Current taxation
	Current year	76 549	78 252	–	–
	Prior year underprovision	702	757	–	–
	Secondary Taxation on Companies
	Current year	10 994	9 325	–	–
	Deferred taxation
	Current year	(3 720)	2 281	–	–
	Prior year overprovision	–	(1 993)	–	–
	Change in taxation rate	1 597	–	–	–
	Foreign taxation
	Current taxation
	Current year	2 101	1 722	–	14 729
	Prior year underprovision	–	390	–	–
	Withholding taxation
	Current year	–	464	–	–
	Deferred taxation
	Current year	(469)	(154)	–	(442)
		87 754	91 044	–	14 287
	Subsidiaries of the group have estimated computed taxation losses of R233.6 million available for set-off against future taxable income of those subsidiaries. A deferred taxation asset has not been raised in respect of R2.0 million of these computed taxation losses.

22	Earnings per share
		Headline earnings		Basic earnings
		per share		per share
	2005	Undiluted	Diluted	Undiluted	Diluted
	Earnings (R'000)
	Profit attributable to shareholders	204 633	204 633	204 633	204 633
	Adjusted for capital items	17 005	17 005	–	–
		221 638	221 638	204 633	204 633
	Shares ('000)
	Weighted average number of shares	339 914	339 914	339 914	339 914
	Adjusted for share options granted	–	10 519	–	10 519
		339 914	350 433	339 914	350 433
	Earnings per share (cents)	65.2	63.2	60.2	58.4
	2004
	Earnings (R'000)
	Loss attributable to shareholders	(18 527)	(18 527)	(18 527)	(18 527)
	Adjusted for capital items	283 187	283 187	–	–
		264 660	264 660	(18 527)	(18 527)
	Shares ('000)
	Weighted average number of shares	353 571	353 571	353 571	353 571
	Adjusted for share options granted	–	9 475	–	9 475
		353 571	363 046	353 571	363 046
	Earnings/(loss) per share – group (cents)	74.9	72.9	(5.2)	(5.1)
	Earnings/(loss) per share – continuing operations (cents)	68.5	66.7	(10.6)	(10.4)

				2005	2004
				R'000	R'000
23	Dividends paid to shareholders
	Final cash dividend no. 17 – 22.5 cents per share paid 20 December 2004 (2004: dividend no. 15 – 15.1 cents per share paid 8 December 2003)			82 328	53 515
	Interim cash dividend no. 18 – 11.2 cents per share paid 27 June 2005 (2004: dividend no. 16 – 12.5 cents per share paid 5 July 2004)			41 312	45 084
	Total dividends to shareholders			123 640	98 599
	Dividends on treasury shares			(11 175)	(775)
				112 465	97 824
	The directors have approved the final proposed dividend of 18.5 cents per share to be paid on 19 December 2005.
	*Dividend Policy*
	The board of directors decided to reduce the dividend cover from 2.5 to 2.2 times, with effect from and including the final dividend for the 2004 financial year.

24	Restatement of comparatives
	For segmental reporting purposes, Clicks and Pharmacy, which were previously reported as separate segments, have been combined into a single segment referred to as Clicks. This reflects the implementation of the strategy to integrate the Clicks and Pharmacy businesses in the Clicks brand. Comparatives have been restated accordingly. The results of the Pharmacy business are therefore included in the comparative results of Clicks for a period of six months.
	An amount of R24.7 million has been reallocated from cost of merchandise to turnover in 2004 in respect of UPD. This amount relates to discounts granted by UPD which were previously included in cost of merchandise. This has resulted in turnover reducing from R8 048.8 million to R8 024.1 million and cost of merchandise reducing from R6 301.5 million to R6 276.8 million. The reallocation was necessary in order to correctly state the group's turnover.

25	Change in interpretation – operating lease accrual
	The group previously expensed operating lease charges on a cash payment basis. This was generally accepted practice in South Africa as the contractual payment basis was considered as being the most representative of the time pattern of the group's benefit obtained from the leased properties. On 2 August 2005, the South African Institute of Chartered Accountants issued Circular 7/2005 dealing with the requirements of AC105 – Leases in respect of operating leases with fixed rental increases. AC105 states that lease expense/income should be recognised on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user's benefit. The circular clarifies the interpretation of this requirement of the standard, concluding that a "user's benefit" can only be affected by factors that impact the physical usage of the property. This is consistent with the international interpretation of IAS8, AC105's International Financial Reporting Standards' equivalent. Accordingly, the group now recognises rental income and expense in respect of operating leases with fixed increases on a straight-line basis regardless of the actual cash payments made. Comparatives have been restated.
	The effect of this change in interpretation on opening distributable reserve and current year performance is set out below:
				Group
				2005	2004
				R'000	R'000
	Effect on opening distributable reserve
	Cumulative operating lease expense accrual			(76 488)	(67 954)
	Deferred taxation			22 946	20 386
				(53 542)	(47 568)
	Effect on profit/(loss) attributable to shareholders
	Operating lease expense accrual			(9 018)	(8 534)
	Deferred taxation			2 615	2 560
				(6 403)	(5 974)
	Effect on earnings and headline earnings per share (cents)			(1.9)	(1.7)
	Effect on diluted earnings and diluted headline earnings per share (cents)			(1.8)	(1.6)
	The effects disclosed are net of deferred taxation at the rates prevailing during the relevant year.

26	Lease commitments
	The group leases all its retail premises under operating leases. The lease agreements for the group provide for minimum payments together, in certain instances, with further annual payments determined on the basis of turnover.
	Future minimum lease payments under non-cancellable operating leases
	– Not later than 1 year			268 374	229 739
	– Later than 1 year, not later than 5 years			749 487	818 829
	– Later than 5 years			323 190	108 813
				1 341 051	1 157 381
	The future minimum lease payments represent cash payment commitments and have not been reduced by the operating lease accrual detailed in note 14.

27	Contingent liabilities
	The company has furnished guarantees to bankers in respect of gross liabilities recognised on the balance sheets of certain subsidiary companies of R1 296.5 million. The net liability recognised on the group balance sheet in respect of these liabilities is R238 million.
	A subsidiary has provided a guarantee to their bankers, in respect of that subsidiary's owner driver scheme. Should the driver default on repayments of the loan instalments, that subsidiary company will be required to settle any remaining obligation to the banker. The net amount owing by the owner drivers is R4.6 million.
	In the opinion of the directors, the possibility of loss arising from these guarantees is remote.
	Certain subsidiary companies have concluded agreements with third parties external to the group which may result in future payments giving rise to additional goodwill in respect of certain historic acquisitions. The maximum additional payments amount to R2.5 million. These payments are contingent on various uncertain future events.

Group

2005

2004

R'000

R'000

28 Capital commitments

Capital expenditure approved by the directors

Contracted

80 347

65 729

Not contracted

83 687

159 940

164 034

225 669

To be financed from borrowings and internally generated funds.

29 Retirement benefits

Pension and provident funds

Four funds, which are registered and governed in terms of the Pension Funds Act, 24 of 1956, are operated by the group.

These funds are:

– the Clicks Group Retirement Fund;

– the Clicks Group Negotiated Pension Fund;

– the Clicks Group Negotiated Provident Fund; and

– the New UPD Corporate Selection Pension Fund.

The funds are defined contribution funds and are actuarially valued periodically.

The most recent valuations confirmed that all four funds were in a sound financial position.

In addition to the above funds, employees of UPD can elect to join the SACCAWU National Provident Fund or Chemical Industries National Provident Fund, which are not operated by the group. PM&A employees can elect to join either the Rainmaker Pension Fund or the Rainmaker Provident Fund. Neither of these are operated by the group.

All permanent full-time staff members are obliged to join, at their choice, one of the funds.

Employee and company contributions to the above funds are included in employment costs detailed in note 19.

Medical benefits

The group subsidises a portion of the medical aid contributions of certain retired employees.

An actuarial valuation of the Clicks Medical Aid scheme has determined that the unfunded liability in respect of pensioner post-retirement medical benefits amounts to R19.9 million (2004: R18.3 million). Provision has been made for the full unfunded liability (see note 17).

30 Related party transactions

Transactions between group subsidiaries

During the year, in the ordinary course of business, certain companies within the group entered into arm's length transactions. These intragroup transactions have been eliminated on consolidation.

Directors and key management

A number of directors of the company hold positions in other entities, where they may have significant influence over the financial or operating policies of these entities. Accordingly, the following is considered to be such an entity:

Director	Entity
DM Nurek	Investec Bank Limited

Transactions between the group and this entity have occurred under terms and conditions that are no more favourable than those entered into with third parties in arm's length transactions.

These transactions include:

(i) Investec Bank Limited manages certain cash on call on behalf of group companies.

(ii) Investec Bank Limited has provided funding to group companies.

(iii) A group company has invested in an Investec Bank Limited group company (see note 5).

(iv) A group company has purchased a derivative instrument from Investec Bank Limited (see note 9).

Certain non-executive directors of the group are also non-executive directors of other public companies which transact with the group. Except as disclosed above, the relevant directors do not believe they have significant influence over the financial or operating policies of those companies. Those entities are not disclosed above.

Directors are not bound by service contracts extending beyond 12 months.

Shares held by directors and their related entities

The percentage of shares held by directors of the company and their related entities at the balance sheet date are disclosed in the Corporate Governance section of this annual report.


31	Financial instruments
	31.1	*Treasury risk management*
		Executive management meet on a regular basis to analyse currency and interest rate exposures and re-evaluate treasury management strategies. The group entered into certain interest rate swap agreements in respect of certain fixed rate long-term borrowings. The group has fair valued these contracts and included the value in accounts receivable (see note 8).
	31.2	*Foreign exchange risk management*
		The group is exposed to foreign currency risk as it imports merchandise. This risk is mitigated by entering into forward foreign exchange contracts. These contracts are matched with anticipated future cash flows in foreign currencies. The group does not use forward foreign exchange contracts for speculative purposes. At 31 August 2005, the group had open forward exchange contracts to purchase US$10.9 million within three months after year-end at rates varying between R6.51 and R6.84 to the US dollar. The group also had open forward exchange contracts to sell US$2.8 million within two months after year-end at rates varying from R6.42 to R6.63 to the US dollar. The group has fair valued these contracts and included the value in accounts receivable/accounts payable and accruals (see notes 8 and 17).
	31.3	Credit risk management
		The group is exposed to credit risk in respect of its trade debtors, short-term cash investments and loans to third parties. Management have a formal credit policy in place. In respect of trade debtors, credit limits are assigned based on credit checks. Short-term cash investments are placed with large reputable financial institutions of high credit standing. Loans to third parties are advanced after comprehensive risk assessments have been performed.
		The group's maximum exposure to credit risk is represented by the carrying value of its financial assets disclosed in the balance sheet as well as the contingent liabilities referred to in note 27.
	31.4	*Interest rate risk*
				Maturity of interest-bearing asset/liability			Non–
				1 year	1 to	Over	interest
				or less	5 years	5 years	bearing	Total
		2005	Interest terms	R'000	R'000	R'000	R'000	R'000
		Assets
		Accounts receivable		–	–	–	494 515	494 515
		Loans	Variable	–	47 707	–	5 021	52 728
		Cash on hand	Variable	70 315	–	–	–	70 315
		Derivative		–	–	–	14 445	14 445
		Total financial assets		70 315	47 707	–	513 981	632 003
		Liabilities
		Accounts payable and accruals		–	–	–	1 451 713	1 451 713
		Short-term borrowings	Variable	13 903	–	–	–	13 903
		Loans payable	Fixed	69 121	148 602	–	–	217 723
		Loans payable	Variable	23 903	19 081	–	–	42 984
		Total financial liabilities		106 927	167 683	–	1 451 713	1 726 323
		Net financial liabilities		(36 612)	(119 976)	–	(937 732)	(1 094 320)
	31.5	*Fair values of financial instruments*
		At 31 August 2005, the carrying amounts of cash on hand, accounts receivable, short-term borrowings and accounts payable and accruals approximate their fair values due to their short-term maturities.
		Derivatives are carried at fair values determined by external, independent experts.
		As the terms of other financial instruments are consistent with similar financial instruments concluded at arm's length, the directors consider their carrying amounts to approximate their fair values.

32 Share incentive scheme

New Clicks Holdings Share Trust (the Share Trust)

The aggregate number of shares and share options that may be utilised for the purposes of the Share Trust is 20% of the aggregate of the company's issued share capital and the number of share options in issue.

2005

2004

Number of shares

'000

'000

Shares and share options available for allocation to employees

Balance at the beginning of the year

83 762

83 856

Increase/(decrease) as a result of net number of share options granted/(forfeited) during the year

183

(94)

Balance at the end of the year

83 945

83 762

Shares allocated and options granted to employees

Shares

Balance at the beginning of the year

3 146

4 921

Delivered to participants

(620)

(1 775)

Balance at the end of the year

2 526

3 146

Options

Balance at the beginning of the year

57 601

65 157

Granted to participants

4 650

500

Delivered to participants

(9 055)

(7 087)

Options forfeited by participants

(3 733)

(969)

Balance at the end of the year

49 463

57 601

Total shares allocated and options granted

51 989

60 747

Details of share option allocations:

		Balance at	Granted	Delivered	Forfeited	Balance at
		beginning	during	during	during	the end of
Issue date	Price	of the year	the year	the year	the year	the year
October 1998	R3.50	2 001 403	–	(498 950)	–	1 502 453
January 1999	R5.35	18 970 500	–	(3 574 650)	–	15 395 850
July 1999	R7.80	5 085 000	–	(1 370 000)	(170 000)	3 545 000
September 2000	R9.30	7 910 000	–	(150 000)	(400 000)	7 360 000
April 2001	R7.40	7 665 000	–	(1 854 500)	(212 500)	5 598 000
July 2002	R6.70	6 010 000	–	(1 107 500)	(800 000)	4 102 500
October 2002	R5.70	250 000	–	–	–	250 000
January 2003	R6.50	3 050 000	–	(500 000)	(500 000)	2 050 000
June 2003	R5.90	20 000	–	–	–	20 000
August 2003	R6.30	6 139 000	–	–	(1 650 000)	4 489 000
October 2003	R7.10	500 000	–	–	–	500 000
June 2005	R7.50	–	3 500 000	–	–	3 500 000
August 2005	R8.32	–	1 150 000	–	–	1 150 000
Total		57 600 903	4 650 000	(9 055 600)	(3 732 500)	49 462 803

The share option scheme operates on a deferred delivery basis, with participants being able to take delivery of 50% after three years and the balance after five years, up to a maximum of 10 years.

Share options granted meet the definition of equity-settled share-based payments. The group has not recognised an expense during the current or prior periods relating to these options.


			2005	2004
			R'000	R'000
33	Employee statistics
	Number of permanent employees		8 947	9 011
	Headline earnings per employee (R) – continuing operations		24 772	26 867
	Staff turnover:
	Total number of employees at the beginning of the year		9 011	7 973
	Add:	Recruitments	1 727	3 591
		Acquisitions of new businesses	–	1 381
			10 738	12 945
	Less:	Resignations	(1 354)	(2 518)
		Deaths	(27)	(51)
		Dismissals	(294)	(281)
		Retirements	(25)	(19)
		Retrenchments	(91)	(87)
		Disposals of businesses	–	(978)
	Total number of employees at the end of the year		8 947	9 011


34	Events subsequent to balance sheet date

		No significant events took place between the end of the financial year under review, and the date of signature of these financial statements with the exception of the declaration of the final dividend (see the Directors' Report for more details).

			2005	2004
			R'000	R'000
35	Cash flow information
	35.1	*Cash generated by operations*
		Profit before interest and taxation	341 473	146 582
		Adjustment for:
		Amortisation of trademarks	650	650
		Depreciation	104 084	108 371
		Fair value adjustment – derivative	3 945	–
		Fair value adjustment – share appreciation rights	662	–
		Foreign exchange loss/(profit)	2 500	(5 361)
		Goodwill amortisation	–	16 272
		Goodwill impairment	16 814	258 196
		Impairment of property, plant and equipment	–	13 496
		Operating lease accrual (see note 25)	9 018	8 534
		Loss on disposal of property, plant and equipment	270	2 281
		Profit on sale of Australian operations	–	(1 738)
		Profit on sale of Intercare	–	(587)
			479 416	546 696
		Working capital changes
		Increase in inventories	(210 541)	(206 200)
		Increase in accounts receivable	(50 753)	(63 577)
		Increase in accounts payable and accruals	57 933	201 377
		Increase in derivatives	(18 390)	–
			(221 751)	(68 400)
			257 665	478 296
	35.2	*Taxation paid*
		Taxation prepaid/(liability) at beginning of the year	5 618	(7 034)
		Acquisition of subsidiaries and businesses (see note 35.3)	–	(337)
		Current taxation provided	(90 346)	(105 639)
		Disposal of subsidiaries and businesses (see note 35.4)	–	17 336
		Exchange rate adjustment	–	(440)
		Taxation prepaid at end of the year	(24 530)	(5 618)
			(109 258)	(101 732)
	35.3	*Acquisition of subsidiaries and businesses*
		During the 2004 year, the group acquired a 100% interest in PM&A. The cost of the acquisition amounted to R1 for each legal entity.
		The fair values of assets acquired and liabilities assumed were as follows:
		Property, plant and equipment	–	(29 935)
		Deferred taxation	–	(2 065)
		Inventories	–	(132 065)
		Accounts receivable	–	(44 227)
		Cash	–	(13 435)
		Long-term loans	–	7 242
		Accounts payable and accruals	–	161 116
		Intragroup loans	–	473 816
		Total net liabilities assumed	–	420 447
		Goodwill on acquisition	–	(420 447)
		Purchase consideration	–	–
		Cash acquired on acquisition	–	13 435
		Net cash flow on acquisition	–	13 435
		The group consolidated the Share Trust for the first time with effect from 1 September 2003. The Share Trust holds shares on behalf of certain employees as well as shares that will be utilised to meet the group's commitments in terms of outstanding share options. No consideration was paid for the acquisition.
		The fair values of assets acquired and liabilities assumed were as follows:
		Treasury shares	–	(22 841)
		Accounts receivable	–	(25 889)
		Cash	–	125
		Intragroup loan	–	46 134
		Accounts payable and accruals	–	2 134
		Taxation	–	337
		Total net assets acquired	–	–
		Cash acquired on acquisition	–	(125)
		Net cash flow on acquisition	–	(125)
		Net cash flow on acquisitions of subsidiaries and businesses	–	13 310
	35.4	*Proceeds from disposal of subsidiaries and businesses*
		During the 2004 financial year, the group disposed of its interest in New Clicks Australia (Proprietary) Limited.
		The fair values of the assets and liabilities sold were as follows:
		Property, plant and equipment	–	146 670
		Foreign currency translation reserve	–	(46 117)
		Goodwill	–	128 788
		Deferred taxation	–	14 518
		Inventories	–	332 600
		Accounts receivable	–	94 501
		Cash	–	57 706
		Loans receivable	–	876
		Loans payable	–	(17 788)
		Investment	–	4 331
		Accounts payable and accruals	–	(329 354)
		Taxation	–	(17 336)
		Total net assets disposed of	–	369 395
		Profit on sale	–	1 738
		Net proceeds	–	371 133
		Foreign exchange gain on foreign proceeds	–	3 707
		Total cash proceeds	–	374 840
		Cash disposed of	–	(57 706)
		Net cash flow from disposal	–	317 134
		During the 2004 year the group disposed of its 80% holding in Intercare Managed Healthcare (Proprietary) Limited. The fair values of assets and liabilities disposed of were as follows:
		Property, plant and equipment	–	6 435
		Inventories	–	399
		Accounts receivable	–	13 708
		Cash	–	6 778
		Loans payable	–	(27 135)
		Accounts payable and accruals	–	(1 057)
		Deferred taxation	–	285
		Total net liabilities disposed of	–	(587)
		Profit on sale	–	587
		Proceeds	–	–
		Cash disposed of	–	6 778
		Net cash flow from disposal	–	(6 778)
		Net cash flow from disposals of subsidiaries and businesses	–	310 356
		During the 2004 year the discontinued operations had cash inflows from operating activities of R69.6 million, cash outflows from investing activities of R10.3 million and cash inflows from financing activities of R7.8 million.
	35.5	*Shareholders' funds raised*
		Shares issued	57 334	33 220
		Share issue expenses	(273)	(195)
			57 061	33 025
	35.6	*Cash and cash equivalents*
		Cash on hand and at bank	70 315	410 404
		Short-term borrowings	(13 903)	(8 710)
			56 412	401 694

Financials

Notes to the Financial Statements

1

Property, plant and equipment

2

Trademark

3

Goodwill

4

Deferred taxation

5

Unlisted investment

6

Loans

7

Inventories

8

Accounts receivable

9

Derivative

10

Share capital and share premium – group and company

11

Treasury shares

12

Non-distributable reserves

13

Loans payable

14

Operating lease accrual

15

Short-term borrowings

16

Borrowing powers

17

Accounts payable and accruals

18

Occupancy costs

19

Employment costs

20

Other operating costs

21

Taxation

22

Earnings per share

23

Dividends paid to shareholders

24

Restatement of comparatives

25

Change in interpretation – operating lease accrual

26

Lease commitments

27

Contingent liabilities

28

Capital commitments

29

Retirement benefits

30

Related party transactions

31

Financial instruments

Treasury risk management

Foreign exchange risk management

Credit risk management

Interest rate risk

Fair values of financial instruments

32

Share incentive scheme

33

Employee statistics

34

Events subsequent to balance sheet date

35

Cash flow information

Cash generated by operations

Taxation paid

Acquisition of subsidiaries and businesses