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Financial Overview and Company Performance Presentation

This presentation outlines the financial results and performance metrics of New Clicks in Australia and South Africa for the year 2003. It covers key aspects such as turnover, gross profit margins, expenditure, operating profit, inventory levels, loans to third parties, cash flow, and strategic initiatives in various business segments. The data presented highlights the challenges and successes of the company in the competitive retail market. The presentation concludes with insights from key executives on future growth strategies and performance objectives.

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Financial Overview and Company Performance Presentation

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  1. Group Results 2003

  2. Outline of presentation • Financial Results André Vermeulen • New Clicks Australia Jeff Sher (video) • New Clicks South Africa Trevor Honneysett • Conclusion Trevor Honneysett

  3. Financial Results André Vermeulen

  4. Performance

  5. Headline earnings per share

  6. Booklet only Performance per six months

  7. Turnover * Australia impacted by exchange rate & move to franchise model

  8. Booklet only Turnover - geographic contribution * Australia impacted by exchange rate & move to franchise model

  9. Turnover - Australia Notes: Priceline Pharmacy Sales = Distribution Fee of product sales to franchisees House Sales = 1 Company Store & Import Sales. Last Year 2 stores operating Price Attack = 2 Company Owned stores for part year

  10. Gross profit margin - group Reduction in gross margin due to: • UPD operates at a lower gross profit margin • Impact of lower Lifestyle product contribution

  11. Expenditure * Impacted by exchange rate (total benefit of R51 865k) & move to franchise model

  12. Booklet only Expenditure

  13. Operating profit * Australian profit in Rand adversely impacted by strong Rand

  14. Operating profit - Australia Notes: Priceline Pharmacy = Costs for setup, late opening of stores Priceline = 2 Stores converted to Pharmacies

  15. Interest • Increase in rates (Average 2003: 13.5%, 2002: 11.0%) • Funding for acquisition of Price Attack (R72.2m / A$12.2m) • Increase in inventory

  16. PM&A

  17. Booklet only PM&A

  18. Booklet only Balance sheet

  19. Inventory

  20. Booklet only Inventory levels • Inventory turn in SA, incl. UPD 5.3 times • Inventory turn in SA, excl. UPD 4.5 times (2002: 5.2) • Inventory turn in Aus 5.9 times (2002: 5.1) • Clicks - aggressive & successful promotions • Discom - additional promotions during this period • Body Shop growth - new stores & cosmetics range • DC growth is apportioned to new suppliers • Imports up 57% to R217m & landing earlier this year • Music - lower sales & decentralised buying controls

  21. Booklet only Loans to third parties

  22. Booklet only Cash flow Note: UPD acquisition through share issue

  23. New Clicks Australia Jeff Sher

  24. New Clicks Australia – Review • Shared service capability now in place • Franchise skills developing • Successful integration of Price Attack • Formulated & started to roll out pharmacy model • New management structure – ASF/OMF • Restructured to meet future growth • Leading the way in haircare, homeware & healthcare

  25. New Clicks Australia – The new way 1. Selling of stores: • Non-performers converted to Pharmacy • Franchisees who do not meet compliance standards - managed • Buying & selling now part of the business • Not limited to Priceline 2. Profit centres: • Marketing services • Store development

  26. New Clicks Australia – Behind the numbers • One-off costs quite significant for pharmacy & completion of Price Attack acquisition • Anomalies in the House performance • Pharmacy development • Reallocation of costs to meet demands of franchise business

  27. Booklet only Priceline - Snapshot

  28. Booklet only Priceline Pharmacy - Snapshot

  29. Priceline & Priceline Pharmacy HIGHLIGHTS • Appointment of Phillip Smith – brand leader • Appointment of John Stapleton – merchandise head • Restructure to meet demands of Pharmacy operations • Repositioned in response to market • 1.2m ClubCard members • 15 new stores (7 pharmacies) • Stock growth well below income growth • Achieved good sales growth in tough market

  30. CHALLENGES EDLP approach & Woolworths aggression Pharmacy positioning Pharmacy supply chain Systems development Shrinkage Priceline & Priceline Pharmacy • KEY ACTION PLANS • Interlocking marketing programme underpinned by “You Pay Less” • Change to Priceline business model • Changes to operational structure to deal with pharmacy • Supplier relationships for middle shop product • Investment in technology to cope with systems requirements • Upgrade in security procedures

  31. Priceline Pharmacy – Success factors Conversions: • Converting existing Priceline store (Prahran) • Sales growing in excess of 40% • Back & middle shop sales already at 18% - should double • Converting existing pharmacy (Bentleigh) • Script sales grown by 20% • Front shop sales up from 10% to 75% New site: • Mornington • Turnover A$45k per week from 300m² • Front shop sales 50%

  32. Booklet only House - Snapshot

  33. House HIGHLIGHTS • Brand Repositioning – Inspirational Homewares • Appointment of Simon Dryden & a restructured brand team • Developed a Local area marketing approach • Developed strategic Supplier relationships enhancements to other income to follow • Achieved 23% growth in Franchise fees • Won National Award for Retail Excellence

  34. KEY ACTION PLANS New marketing programme & Pay-TV alliance Redefine product classification Implementation of new in-store positioning Franchisee compliance Upgraded receivables Development of extranet & enhancement to billing CHALLENGES Growth in competition Sameness of product SARS – impact on import quantity Bad debts House

  35. Booklet only Price Attack - Snapshot

  36. HIGHLIGHTS Successful integration into business Resolved all franchise agreements Appointed Carmelo Francese as the new brand leader Resolved Master Franchisee in Western Australia Adopted a Marketing focus Overcome supplier & franchisee scepticism Price Attack

  37. CHALLENGES Complexity of salon vs retail Competition in Victoria Transition from previous culture Private label acceptance KEY ACTION PLANS New store format New customer communication Salon contract Association with women’s basketball Local area marketing Change of IT platform - easier decision making Price Attack

  38. HIGHLIGHTS Store development & marketing services shift to nil cost Development of franchise skills JDA first phase completed Developed an Integrated IT pharmacy solution Realigned costs from the centre to brands CHALLENGES Moving from cost centre to profit generation Growth in staff numbers to deal with franchise capability Getting expense allocations right with diversity of business models Office accommodation Shared Services

  39. New Clicks Australia – The year ahead • Restructured – governance in place • No additional funding required – store sale methodology • Priceline positioning • Store growth in pharmacy • House marketing • Price Attack – Victoria solution • Systems development – Franchise • Enhance capability – reduce costs

  40. New Clicks South Africa Trevor Honneysett

  41. New Clicks South Africa – Review of the year • Deregulation of pharmacy now a reality • Lifestyle category in transition … • … significant steps taken to address this • “You Pay Less at Clicks” is back • Benefits of UPD acquisition • Improving performance from Discom • PM&A performance improving as we move to integration • Stock turn improvements not sustained

  42. Booklet only Clicks - Snapshot * During the year, a number of part-time employees became full-time employees, in terms of the new Labour Relations Act

  43. Clicks HIGHLIGHTS • Pharmacy now a reality • PM&A integration started • PM&A showing ongoing improvement • Brand decision for pharmacy taken – Clicks • Focused leadership team • Integrated merchandising team • FMCG & Beauty continue to do well

  44. Clicks turnover growth

  45. CHALLENGES Reverse decline in homewares Price competitiveness Entire customer experience In-store look & feel In stock position Clicks • KEY ACTION PLANS • New core homeware range • Value proposition • Store presentation • “Expect to pay less” • Basket checks vs competitors • Promotions • Reduce operating costs • Greeters & aisle walkers • Focus on top 50 stores • Dedicated staff for home & beauty • Merchandising solution – clustering & ranging

  46. Pharmacy • Improved shrinkage • Professional training • Disease management • Promotions HIGHLIGHTS • Multifunctional, implementation team set up • Key legislation in place • Product & pricing benefits through UPD • Better buying discipline • Centralised pricing • Reduced staff costs

  47. Booklet only Pharmacy integration project PROGRESS: • Preparation work well underway • Marketing, IT, Operations, OD, Category, Store development, Finance, Legal, Change management • Pilot store (Glengariff PM&A) -> Clicks Pharmacy on 3 Nov as a JV • Planning to convert 4 other PM&A pharmacies in 2003 • First conversion of a newly opened Clicks store to JV Clicks Pharmacy format in 2003 • For 2004: • Other PM&A stores to convert • Up to 17 new Clicks stores with Pharmacy • Up to 40 Clicks refurbs with pharmacy

  48. KEY ACTION PLANS Integration into Clicks Category management/buying In store promotions Generic substitution Phase-out of LinkMax Focus on ICU stores Integration of IT platform Medical aids Build relationships with doctors Sustain relationship with government Pharmacy CHALLENGES • Sales & profit growth • Stock turn too slow • Integration of pharmacy systems • Relationship with funders • Relationship with doctors

  49. Booklet only

  50. Booklet only UPD - Snapshot

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