Bertina Engelbrecht Bertina Engelbrecht
Group human resources director

Sustainability Report


Sustainability management practices have been increasingly integrated into the business over the past year as the group strives to achieve a balance between generating returns for shareholders and meeting the long-term needs of the business, society and the environment.

Introduction

New Clicks believes sustainable development will create enduring prosperity for its major stakeholders in the following ways:

  • Enhancing wealth for shareholders;
  • Improving long-term opportunities for employees;
  • Creating an increasingly compelling offer for customers; and
  • Empowering and uplifting communities.

The group continues to expand its reporting on social, economic and environmental sustainability and has introduced a broader range of performance metrics relating to employees, transformation and environmental impact. Management plans to provide targets for non-financial performance in future.

Market Share Growth in all businesses

Sustainable progress in 2008

In the 2007 annual report the group outlined ten sustainability priorities for the year ahead and has made pleasing progress in most areas:

Sustainability priorities for 2008 Performance against priorities in 2008
  • Investigate inclusion in JSE Socially Responsible Investment (SRI) Index
  • Continued participation in Best Company to Work For survey
  • Ongoing improvement in earnings and shareholder value
  • Entrench employee wellness programme
  • Continued engagement with trade unions
  • Ongoing progress with transformation and measure independently
  • Increase social investment through the New Clicks Foundation
  • Expand primary care clinic network in Clicks stores
  • Build sustainable pharmacy profession through Pharmacy Healthcare Academy
  • Continue to grow market share and increase customer loyalty
  • New Clicks will be assessed for inclusion in the 2008 index
  • Ranked 12th in the large company category in 2008 survey
  • 28.1% growth in diluted headline earnings per share
  • Utilisation of programme increased from 18.4% to 19.1%, compared to consumer services sector rate of 10.4%
  • Ongoing engagement resulted in improved quality of relationships
  • External rating has been commissioned
  • R5.6 million donated to New Clicks Foundation as well
  • as R4.2 million in product donations
  • Number of clinics increased to 97
  • Over 700 pharmacists and assistants trained during the year, with 45% black participants
  • Continued market share growth in all businesses

Sustainability indicators 2008 2007 2006 2005
Financial performance
Headline earnings Rm 401 357 252 201
Diluted headline earnings per share cents 131.9 103.0 71.0 57.4
Return on shareholders’ interest % 32.8 24.7 16.7 14.2
Return on total assets % 10.6 9.3 7.2 6.0
Distributions per share cents 61.1 48.2 33.2 29.7
Change in market capitalisation Rm (321) 1 223 840 98
Wealth created through cash value added Rm 2 115 2 112 1 780 1 593
Trading performance          
Total leased trading area m2 197 530 252 239 241 551 253 688
Number of stores 519 500 482 484
In-store dispensaries 157 125 110 60
In-store clinics 97 92 81 40
Market share
– Clicks: front shop health % 37 37 35 *
– Clicks: retail pharmacy % 10.7 9.3 * *
– Clicks: beauty % 25 25 25 *
– Musica: CD % 41 38 * *
– Musica: DVD % 22 20 * *
– Musica: Gaming software % 9 9 * *
– UPD: private wholesale distribution % 26.4 25.6 24.9 *
Employees
Permanent staff 7 122 9 076 9 058 8 947
Staff turnover % 21.2 23.4 23.9 20.2
Skills development % payroll % 3.6 2.76 1.13 n/a
Employee wellness utilisation % 19.1 18.4
Transformation
Employment equity
– Black staff % of total staff % 84.2 86.9 82.6 85.0
– Black senior and top management % 18 24 22
– Black middle management % 35 37 35
– Black junior management % 80 86 73
– Black directors % 36 22 20 25
– Women % of total staff % 62 60 60
– Women senior and top management % 36 43 28
– Women middle management % 53 58 59
– Women junior management % 62 63 60
– Women directors % 27 9 10 13
Transformation rating Level 6 7 * *
Corporate social investment (CSI) Rm 9.8 0.4 0.4 0.7
Environmental indicators
Carbon emissions (CO2) Tons 127 014 * * *
Electricity consumption kWh 90 617 049 * * *
* Not previously disclosed or measured

Economic sustainability

Value added statement
for the year ended 31 August 2008
2008*
R’m
2007*
R’m
Turnover 11 331 11 205
Other income and finance income 520 517
Paid to suppliers for goods and services (9 736) (9 610)
Value added 2 115 2 112
Applied as follows:
Employees – salaries, wages and other benefits 1 047 1 091
Lessors for use of premises 303 336
Lenders for monies borrowed 70 55
Providers of capital – cash distributions** 27 26
Tax 187 120
  Corporate tax 182 116
  Property taxes 5 4
Reinvested in the group 481 484
  Deferred tax (37) 25
  Depreciation and amortisation 103 104
  Retained income 415 355
       
  Distribution of value added 2 115 2 112
* To provide comparative information the results of Discom have been included as part of continuing operations in 2008 and 2007
** Does not include cash distributions paid via share premium of R148.7 million (2007: R95.4 million)

2008   2007
       
49.5%   Employees – salaries, wages and other benefits 51.7%
       
14.3%   Lessors for use of premises 15.9%
       
3.4%   Lenders for monies borrowed 2.6%
       
1.3%   Providers of capital – cash distributions** 1.2%
       
8.8%   Tax 5.7%
       
22.7%   Reinvestment in the group 22.9%

Social sustainability

People strategy
  • We value excellence and superior customer service that delivers a sustainable competitive advantage;
  • Our people are motivated and competent; and
  • We invest in the continuous learning and development of our people and celebrate diversity.

Employee turnover analysis    
Permanent staff 2008 2007
Staff complement at the
start of the year 9 076 9 058
Add: Recruitments 1 602 2 136
Less: Disposal of Discom (1 636)
Resignations (1 562) (1 626)
Deaths (41) (31)
Dismissals (260) (319)
Retirements (34) (28)
  Retrenchments (23) (114)
Staff complement at the end of the year 7 122 9 076
Staff turnover (%) 21.2 23.4

Employment equity

The group is committed to creating a diverse workforce which reflects the demographics of South Africa. The promotion and advancement of previously disadvantaged people and the empowerment of women remains a priority.

The commitment to both employment equity and women empowerment was demonstrated by the appointment of three black females to the board (two independent non-executive directors and an executive director) during the year.

The group was awarded a certificate of excellence in the Top Women Awards hosted by Topco Media in the category for the top engendered company in the tertiary sector.

Race      
       
4%   Asian Race
     
51%   African
     
30%   Coloured
     
15%   White
     
     
Gender      
       
63%   Female Gender
     
37%   Male
     
     
     
     
     
Age      
       
43%   under 30 Age
     
32%   30 - 39 years
     
18%   40 - 49 years
     
7%   over 50 years
     
     
     
Service      
       
68%   0 - 5 years Service
     
12%   6 - 10 years
     
8%   11 - 15 years
     
6%   16 - 20 years
     
6%   over 20 years
     

Best Company to Work For survey

The 2008 Deloitte Best Company to Work For survey attracted 119 companies across 20 industries and New Clicks was ranked 12th out of 16 participants in the large company category (more than 2 500 employees).

Based on a sample of 10% of employees, the 2008 survey rated the dimensions of management style, HR policies and procedures, change management and values and culture most favourably. Areas where employees would like to see improvements are diversity and transformation, performance management, innovation and training and development.

Skills development

The group invested R26.7 million in learning and skills development during the year, equating to 3.6% of basic payroll costs.

A total of 2 607 staff members attended training courses, with black employees accounting for 35% of the total employees trained.

New Clicks’ role in addressing the skills development challenge includes participation in the Wholesale and Retail sector education and training authority (SETA) standards generating body and involvement with the South African Pharmacy Council (SAPC) through the New Clicks Pharmacy Academy.

  • Pharmacy skills development

The Pharmacy Healthcare Academy has been instrumental in the development of pharmacists and pharmacists’ assistants for Clicks and external bodies. The academy is registered with the SAPC and offers a range of courses including pharmacist assistant training, learnership programmes, internship courses and continuing professional development programmes for registered pharmacists. Over the past year the academy has focused on increasing the intake of black learners.

  • Retail management skills development

Store manager development was identified as one of the key areas of skills development for the group. In response to this need a programme was initiated through the Cape Peninsula University of Technology, with 45 store managers from Clicks, Musica and The Body Shop participating in the first course.

Employee wellness

The Employee Wellness Programme (EWP) has been entrenched across the business in its second year of operation, with employees embracing the counselling and advisory services offered. Utilisation has increased from 18.4% in 2007 to 19.1%, compared to the benchmark for the consumer services sector of 10.4%.

Employee wellness programme 2008 2007
Total engagement rate of counselling and advisory services 21.6% 20.5%
Employees on HIV management programme 55 58
Cost of programme R3.0 million R2.6 million
     

The EWP consists of the following components:

  • Counselling and advisory services

The philosophy of the EWP is to encourage and support behaviour that results in staff being healthy and making the right lifestyle choices. Employees and their family members are offered free, confidential, professional counselling and advice, 24 hours a day in all official languages. The EWP supports employees who have lost or are at risk of losing their “wellness balance”, and also strongly advocates prevention by encouraging employees to tackle issues as soon as they arise.

2008 2007
Employee utilisation 1 309 1 590
Family utilisation 74 58
Individual utilisation 1 383 (19.1%) 1 648 (18.4%)
Group utilisation (trauma, family) 181 (2.5%) 190 (2.1%)
Managerial use of EWP 226 (16.3%) 300 (18.2%)
Manager referrals 23 (1.7%) 19 (1.2%)
High-risk cases 34 37
     

  • HIV management and treatment programme

Testing in the workplace has proved to be an effective means of encouraging staff members to ascertain their HIV status, particularly as the voluntary counselling and testing is integrated into general health screenings.

This HIV prevention strategy is complemented by an outsourced HIV management programme administered by Qualsa. The programme offers free treatment and monitoring for HIV-positive employees and counselling for the employees and their families.

New Clicks is leading an initiative to extend HIV testing to store staff in co-operation with other retailers. The project is being piloted in two shopping centres in the Western Cape and a national pilot project is planned for the 2009 financial year.

  • Lifecare education

A range of training interventions are offered, including how to deal with people in crisis, HIV/AIDS in a broader social context, dealing with tuberculosis and financial health training.

  • Health awareness and screenings

The EWP provides employees with advice on holistic well-being and managing diseases. One of the objectives of the programme is to empower employees to make informed lifestyle decisions that positively impact their well-being and encourage them to take responsibility for their health.

Investing in the Future award winner

New Clicks was acknowledged for the second consecutive year in the Mail & Guardian Investing in the Future awards when it received a special commendation in the company partnership award category. The award recognises the role played by the group in creating a co-operative joint venture among major retail groups to provide employees with better access to healthcare in the workplace.

Industrial relations

Clicks has a long-standing relationship with SACCAWU (South African Commercial Catering and Allied Workers’ Union) which is governed by a formal recognition agreement. SACCAWU currently represents 39% of full-time permanent employees in the bargaining unit and 29% of all Clicks employees. Clicks signed a two-year wage agreement with SACCAWU in July 2007 and will negotiate a wage settlement again in July 2009.

UPD negotiates with CEPPAWU (Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union) which is the majority union representing 35% of UPD’s permanent employees. A one-year wage agreement was reached this year.

The group has focused on building and enhancing relationships with representative unions and no trading days were lost to industrial action during the financial year.

Transformation

The group’s transformation strategy is aligned with the Department of Trade and Industry’s (DTI) codes of good practice and targets have been set for 2010. New Clicks has commissioned an external verification of its transformation status.

Transformation rating
Category Possible score 2008* 2007*
Ownership 23 0 0
Management 11 7.9 5
Employment equity 18 7.2 11
Skills development 15 9.7 11
Preferential procurement 20 11.7 1
Enterprise development 15 12 12
Socio-economic development 5 5 2
Total 107 53.5 42
       

* Based on a self-assessment

Enterprise development

Funding the sale of Style Studio

New Clicks funded an empowerment company to purchase Style Studio, the professional hair care retail business piloted by the group when the business was sold in September 2007.

New Clicks provided an interest-bearing loan to the purchasers which is repayable over five years. The group has also retained a 20% stake in Style Studio which may be purchased by the other shareholders any time after the repayment of the loan.

Our transformation target is to achieve 100% BBBEE compliance by 2010

UPD supporting owner-drivers

UPD operates an innovative enterprise development initiative which provides employment to 59 owner-drivers who are drawn from previously disadvantaged backgrounds.

These drivers service over 80 delivery routes across the country, and the value of the contract is approximately R42 million.

To ensure the sustainability of this initiative, a management company has been appointed to co-ordinate and liaise with the owner-drivers and UPD.

Preferential procurement

New Clicks has encouraged and supported suppliers in obtaining verified BBBEE ratings. The group’s preferential procurement spend for the 2008 financial year was 46%, based on those suppliers with verified ratings.

Improving the preferential procurement rating is challenging as the extension of the implementation date of the BBBEE codes of good practice by the DTI has resulted in many suppliers deferring their rating process. Capacity constraints also prevent some suppliers from providing the required information to support their rating process.

Corporate social investment

New Clicks made an increased commitment to corporate social investment (CSI) in the year under review with a contribution of R5.6 million to the New Clicks Foundation. This was complemented by additional funding and product donations from the business units to the value of R4.2 million.

The Foundation was strengthened with the appointment of business unit executives to the board of trustees and the appointment of a CSI co-ordinator.

Through its funding the Foundation supports community upliftment and the empowerment of vulnerable individuals. The majority of the funding was allocated to specific projects which are aligned with one of the group’s business units in the areas of healthcare, arts and culture.

  • Clicks continued its drive for greater awareness of cancer through support of the Cancer Association of South Africa (CANSA);
  • Musica strengthened its long-standing relationship with DeafSA by raising awareness of hearing impairment;
  • The Body Shop joined forces with the Children on the Edge (COTE) project to support child-headed households; and
  • UPD donated product worth R3.5 million to a range of organisations nationally involved in HIV/AIDS, care of the aged and animal welfare.

Through the Woodstock Upliftment Project, staff continued to arrange fund-raising support for organisations in the Woodstock area where the group’s head office is located.

Customers

Primary care clinics

Clicks supports the government’s vision of making healthcare more affordable and accessible. In addition to its national network of over 150 pharmacies Clicks operates primary care clinics which provide a professional, convenient and affordable alternative for basic medical advice and health checks. Services offered in the clinics include:

  • Blood pressure, cholesterol and glucose screening;
  • Baby immunisation, consultation and advice;
  • HIV/AIDS testing and counselling;
  • Wound care;
  • Treatment of minor ailments; and
  • General counselling and advice.

Shareholders

New Clicks is committed to regular and transparent communication with the investment community while always providing information equally and simultaneously to all market participants. The group has an active investor relations programme focused on shareholders and analysts both locally and internationally.

The group retains the services of an investor relations consultancy to co-ordinate and advise on all aspects of the investor relations and financial communications programmes.

Activities over the past year included:

  • Interim and final results presentations to investors in Cape Town which were also broadcast nationally on subscriber television;
  • Results presentations being webcast to broaden access to investors locally and offshore;
  • Post-results roadshows to sell-side analysts and institutional investors in Cape Town and Johannesburg;
  • 95 meetings held between management and local and international fund managers and analysts, as well as several store visits arranged for analysts;
  • A first-time roadshow to fund managers in the United States; and
  • Management attended and presented at broker and industry conferences locally and abroad.

Environmental sustainability

New Clicks recognises that companies can make a meaningful contribution to sustainable development by reducing the environmental impact of their business operations. While there are currently no regulations or mandatory targets governing carbon emissions or energy efficiency in South Africa, this is likely to change in the next few years.

The group participated voluntarily in the carbon disclosure project (CDP) for the first time in 2008. The CDP aims to assess the potential risks and opportunities relating to climate change and greenhouse gas (GHG) emissions by listed companies and understand the impact on the value of investments.

Shortly before year-end the group commissioned an independent audit of its carbon footprint based on internationally recognised GHG protocols.

The overall annual footprint for New Clicks is 127 014 tons of carbon.

This is the first step in a programme to reduce the group’s environmental impact. A strategy with targets for the reduction of emissions will be developed following a review of the carbon footprint analysis.

Committed to energy saving

  • Clicks voluntarily discontinued selling energy inefficient incandescent light bulbs and provided customers with energy saving bulbs in exchange for their old bulbs;
  • All new fluorescent lighting is electronic, reducing electricity consumption by an estimated 30%;
  • Biodegradable carrier bags are used by The Body Shop;
  • Transport networks for deliveries are being optimised to reduce fuel consumption; and
  • An employee-led “green project” is considering energy saving opportunities at the head office building.

Recycling

Over the past year 942 tons (2007: 795 tons) of cardboard and paper were recycled. This included 632 tons from the three Clicks distribution centres, 130 tons from stores and 180 tons from the head office.

The group has recycling contracts with major vendors and uses local black empowerment companies for recycling at stores.

Recycling at head office has been outsourced to the Oasis Association, a non-profit community-based organisation that creates work opportunities for people with intellectual disabilities and promotes the re-use of goods and materials.

Occupational health and safety

A health and safety policy covers employees, contractors and customers and recognises the responsibility to limit the impact on the environment.

The group aims to create and maintain a healthy and safe work environment and minimise the risk of personal injury or damage to equipment and company property.

All health and safety processes are being re-engineered to ensure compliance with the Occupational Health and Safety Act and the international Occupational Health and Safety Standard (OHSAS) 18001.

Sustainability priorities for 2009

  • Improve rating in JSE SRI Index
  • Improve quality of employee commitment
  • Maintain CSI focus through the New Clicks Foundation and business units
  • Ongoing progress on transformation
  • Build sustainable pharmacy profession through Healthcare Academy
  • Expand the primary care clinic network in Clicks stores
  • Continue to grow market share and increase customer loyalty
  • Overall improvement in earnings and shareholder value