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Note
to the interim profit statement
The interim financial statements comply with South African Statements
of Generally Accepted Accounting Practice.
Review of trading
Exceptional performances from the Australian businesses and
the Music division in South Africa and strong performance by
Clicks have characterised the group's performance for the six
months to February 2002.
Sales have increased by 23,1% and operating profit before interest
and tax by 20,9%.
The group had its best December for many years and this trend
has continued into January and February. Although trading conditions
are regarded as tough in both geographies, this momentum is
being sustained.
Discom is in the middle of a major repositioning and has recorded
a loss.
During the period under review 42 new stores were opened, 30
in southern Africa and 12 in Australia. In excess of 50 new
stores are planned for the second half-year to August 2002 which
will take the total number of stores in the group to nearly
1 200.
Stocks
55% of all stock now flows through our distribution centres
with an increase to 65% expected by the financial year-end.
Stocks have reached a high level due to strategic buy-ins to
ensure that our service levels to the stores would not be impacted
during this process.
Stock levels are planned to be reduced in the next few months
with the consequent paybacks to the balance sheet. This will
be assisted by a world-class category management initiative
which is currently underway.
Divisional overview
New Clicks South Africa
Clicks
All store sales have increased by 12,8% with existing stores
increasing at 6,1%.
The ClubCard continues to grow from strength to strength and
the database now has in excess of 3,2 million customers.
This year Clicks will open in excess of 32 new stores –
a record for the brand and ensures a continuation of the brand's
dominant footprint throughout southern Africa.
| Number of stores |
|
| Company owned |
238 |
| Franchised |
13 |
| Contribution to group sales |
48,7% |
| Contribution to group operating profit
|
78,1% |
The Body Shop
South Africa's new beauty brand, The Body Shop has proved to
be an unqualified success, registering a profit from opening
day. Five stores have been opened to date and a further five
stores are scheduled to open by the end of August.
| Number of stores |
|
| Company owned |
5 |
| Contribution to group sales |
0,4% |
| Contribution to group operating profit
|
0,6% |
Discom
Discom is in the conversion and repositioning stage. The first
of the new look stores were opened in November 2001 and early
signs are encouraging. However, given the vagaries of the market
in which the brand operates, it is still too early to pronounce
this project a success.
We anticipate, however, improved performance during the next
review period. 13 stores have been closed and we anticipate
that there will be at least a further 10 store closures.
| Number of stores |
|
| Company owned |
193 |
| Franchised |
7 |
| Contribution to group sales
|
13,2% |
Music Division – Musica and the Compact Disc Wherehouse
The Music division has increased its market share with exceptional
sales growth of 26.6% in all stores and 13.4% in existing stores
as well as exceeding profit targets by a substantial margin.
The success of the Compact Disc Wherehouse large store format
has given us the confidence to expand this offer and further
opportunities are being researched.
| Number of stores |
|
| Company owned |
137 |
| Contribution to group sales |
8,7% |
| Contribution to group operating profit
|
8,3% |
Healthcare/The Link Investment Trust
This division comprises the 56% interest the group holds in
The Link Investment Trust. There has been a rapid build up in
activities and support services to the Link and LinkMax brands
with consequent improvement in their profit performance.
| Number of stores |
|
| Franchised |
344 |
New Clicks Australia
Priceline
Priceline has delivered a sparkling performance and the brand
is now reaching a level whereby it is becoming a household name
in Australia. An all store sales increase of 14,8% and an existing
stores sales increases of 6,6% have been achieved in a low inflation
environment.
The Priceline ClubCard has been received favourably by customers
in Victoria and will be rolled out nationally in the next few
months.
Five stores were opened during the period under review with
a further 12 planned to open by the end of August 2002.
| Number of stores |
|
| Company owned |
122 |
| Contribution to group sales |
28,6% |
| Contribution to group operating profit
|
18,2% |
House
House has achieved franchisee sales increases of 32% for all
stores and 15% in existing stores. An aggressive store expansion
programme is underway and we expect to have 86 stores open by
August 2002. The introduction of a direct import programme has
resulted in a product differentiation and increased margins
will flow through in the future.
| Number of stores |
|
| Company owned |
2 |
| Franchised |
74 |
| Contribution to group operating profit
|
2,4% |
Prospects
Given the focus of management it is realistic to expect the
group's improved performance in both South Africa and Australia
to continue.
We have great confidence in South Africa and our store expansion
and format growth strategies are testimony to this. The Australian
business grows from strength to strength and we envisage House
entering the New Zealand market in the third quarter.
The group is in an exciting phase of its development with
rapid growth and continued brand focus.
Capitalisation issue and interim dividend
The directors have resolved to award capitalisation shares
to ordinary shareholders.
Shareholders will be given the opportunity to decline the
award of capitalisation shares in respect of all or any part
of their shareholding and to receive an interim cash dividend
of 9,9 cents per share.
The terms of the award of the capitalisation shares will be
published on or about 14 May 2002 and a circular and form
of election will be posted to shareholders on 27 May 2002.
By order of the Board
Allan Scott
Company Secretary
22 April 2002
Directors: D.M. Nurek*,T.C. Honneysett, R.B.
Godfrey, P.W.G. Green, E. Osrin*, J.C. Sher (Australian),
P.E.I. Swartz*, A. Zimbler*, E.D.G. Batts* (alt), M.C. Henkel*
(alt) * non-executive
Registered Address: Cnr Searle and Pontac Streets, Cape Town
8001. PO Box 5142, Cape Town 8000
Sponsor: Investec Securities Limited
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