Retailer New Clicks on Thursday reported a 45.1 percent rise in diluted headline earnings per share to 103 cents for the year ended August from 71 cents a year ago.
A final distribution of 33.2 cents per share made for a total distribution for the year of 48.2 cents, up 45.2 percent on the prior year.
The group's turnover grew 12 percent to R11.2-billion, while operating profit was up 35.8 percent at R533.8-million. Headline earnings increased by 41.9 percent to R356.9-million.
The focus on working capital management saw the group generate cash of R420-million after repurchasing shares of R558-million and continuing to invest for long-term growth across its businesses.
The senior management teams in Clicks, UPD and Musica have all been strengthened to increase the depth of management talent in the group. Following the sale of Discom, the ethnic beauty and hair care retailer, with effect from the beginning of September 2007, the group's retail brands are all now focused on middle and upper income customers.
Retail turnover increased by 13.1 percent and by 13.2 percent on a comparable store basis, with inflation of 2.5 percent. UPD increased turnover by 11.2 percent and experienced inflation of two percent for the year.
Retail gross margin improved to 27.3 percent from 27.1 percent, resulting in retail gross profit increasing by 13.8 percent to R2.1-billion.
The group said Clicks continued to realise the benefits of its focused merchandise strategy, increasing turnover by 14.3 percent. The performance was driven mainly by growth of 19 percent in health and 15.6 percent in beauty, with these two categories now accounting for 70.4 percent of total turnover. Comparable store sales grew by 14.3 percent.
DVD sales strong
Clicks expanded its store base to 320 and opened a further 21 dispensaries to bring the national pharmacy network to 125.
Musica has further entrenched its position as an entertainment brand and strong growth in DVD and gaming sales contributed to a 12.1 percent increase in turnover.
The Body Shop increased turnover by 26.3 percent, boosted by the opening of four new stores and customer response to its loyalty programme.
Discom lifted turnover by seven percent, with operating profit up 17.9 percent to R40-million. During the year 25 stores were closed, including six which were converted to Clicks and one to Musica.
In it wholesale distribution division, UPD increased turnover by 11.2 percent and continued to diversify its client base. An automated pharmaceutical distribution facility was taken into operation late in the financial year at an investment of R43-million to further enhance efficiencies.
Health regulations a concern
Looking ahead, management said it is confident that the group's strategy will provide sustainable competitive advantage. Plans have been developed to deliver the strategy, including implementing the Clicks blueprint programme, diversifying UPD's revenue base and expanding the entertainment offering of Musica.
Retail space will be expanded by five percent with the planned opening of 38 to 40 new stores.
The trading environment is expected to become more challenging in 2008 and uncertainty continues to prevail over healthcare regulations. Nevertheless, the group remains confident of delivering improvements in operating margin and continued cash generation, and anticipates achieving the ROE target of 30 percent in 2008.
Earnings are expected to grow at a more normalised level off the higher base set in 2007, the group concluded.