Clicks reports increased earnings

An interim distribution of 30.5 cents per share was declared, an increase of 24.5%. Return on equity showed a further marked increase from 38.1% to 46.2%.

Chief executive David Kneale said all the group's businesses traded well and strengthened their market leading positions.

"While there has been no marked improvement in consumer spending over the past six months, the health and beauty markets in which the group operates have continued to show their resilience and grown well ahead of the overall retail sector," he said.

Turnover

The group's retail turnover increased by 15.2% to R4.8 billion, driven by the robust performance of the Clicks chain which lifted turnover by 17.5%. Clicks has grown market share across all of its core merchandise categories.

Operating profit rose to R396.8 million from R354.6 million.

Clicks opened 17 in-store dispensaries in the past six months, extending the national pharmacy network to 224 out of a total store base of 354.

The group's pharmaceutical wholesaler, UPD, grew turnover by 6.7% or by 14.9% on a comparable basis as the distribution agency business is no longer reflected in turnover. UPD's growth was primarily due to the focus on its core customer groups of Clicks, hospitals, Link pharmacies and the export business, which collectively accounted for 81% of wholesale turnover.

Musica continued to show its resilience by increasing turnover by 0.5% in an entertainment market which experienced negative growth. Musica continues to gain market share.

Kneale said the Clicks Group is evaluating the viability of a broad-based employee share ownership scheme.

Challenge remains

On the outlook for the remainder of the year, Kneale said the retail trading environment is expected to remain challenging and any recovery in consumer spending is unlikely to benefit second half performance. The impact of the 2010 FIFA World Cup on retail spending remains an unknown factor, he added.

"We will continue to maximise organic growth opportunities in the health and beauty markets. At the same time we are looking to partner with government in primary healthcare initiatives. An example is the recently announced national HIV testing campaign in which Clicks and Link pharmacies are participating."

Kneale said trading for the first seven weeks of the second half had been at similar levels to the first six months.

"We are confident of sustaining our current performance in the second half and are forecasting growth of between 20% and 25% in diluted HEPS for the full year."