sustainability report

Introduction

New Clicks recognises that sustainability is synonymous with good governance and is committed to managing the business in a socially responsible manner that ensures enduring prosperity for all stakeholders.

By adopting the integrated sustainability reporting guidelines outlined in King ll, social, economic and environmental performance measurement is being introduced into the group’s business practices.

Importantly, in the South African context, transformation and broad-based black economic empowerment are critical components in creating a sustainable business.

Against this background the group has expanded its reporting to shareholders by producing a sustainability report for the first time.

Management acknowledges the need to improve sustainability reporting while continuing to enhance financial returns to shareholders and will endeavour to provide shareholders with non-financial performance goals and targets in future.

Sustainability indicators     2007   2006   2005
Headline earnings R’m   356.9   251.6   200.5
Diluted headline earnings per share cents   103.0   71.0   57.4
Return on equity %   24.7   16.7   14.2
Return on total assets %   9.3   7.2   6.0
Distributions per share cents   48.2   33.2   29.7
Increase in market capitalisation R’m   1 223   840   99
Wealth created through cash value added R’m   2 009   1 770   1 593
Total leased trading area m2   252 239   241 551   253 688
Number of stores     500   482   484
In-store dispensaries     125   110   60
In-store clinics     92   81   40
Market share              
– Clicks: front shop health %   37   35   n/a
– Clicks: retail pharmacy %   9   n/a   n/a
– Clicks: beauty %   25   25   n/a
– Musica: entertainment %   21.6   20.5   n/a
– UPD: private wholesale distribution %   25.6   24.9   n/a
Permanent staff     9 076   9 058   8 947
Staff turnover %   23.4   23.9   20.2
Employment equity              
– Black staff %   86.9   86.0   85.0
– Black management %   69.2   n/a   n/a
– Black directors %   22   20   25
Transformation rating (Empowerdex)              
– Group Level   C   n/a   n/a
– UPD Level   BB   n/a   n/a
New Clicks Foundation social investment spend R’000   427   395   660
Skills development % payroll %   2.76   1.13   n/a
Employee wellness utilisation %   19.5   n/a   n/a

Economic sustainability

Value added statement
for the year ended 31 August 2007
  2007**   2006**
  R’m   R’m
Turnover 11 205   10 001
Other income 501   450
Paid to suppliers for goods and services ( 9 697)   ( 8 671)
Value added 2 009   1 780
Applied as follows:      
Employees – salaries, wages and other      
benefits 1 091   989
Lessors for use of premises 336   317
Lenders for monies borrowed 39   57
Providers of capital – cash distributions* 26   63
Tax 120   47
   Corporate tax 116   27
   Property taxes 4   4
   RSC levies -   16
Reinvested in the group 397   307
   Deferred tax 25   57
   Depreciation and amortisation 104   109
   Retained income 268   141
       
Distribution of value added 2 009   1 780
* Excludes cash distributions paid via share premium
** In order to provide comparative information the results of Discom have been included as part of continuing operations in 2006 and 2007.


Social sustainability

Employees

The focus of the human resources (HR) function over the past year has been on building organisational capability through people. This has included structuring HR across the group along functional reporting lines, with HR executives being appointed to the operating boards of all of the group’s business units.

In line with the rest of the business, HR has concentrated on getting the basics right, which has included:

  • Aligning annual salary increases to performance ranking results;
  • Implementing short and long-term incentive schemes aligned to business goals;
  • Completing a talent review of the leadership across the group;
  • Designing a store operations development programme; and
  • Introducing an employee wellness programme.

People strategy

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

Employee turnover analysis

Permanent staff
    2007   2006
Staff complement at the start of the year 9 058   8 947
Add: Recruitments 2 136   2 252
Less: Resignations (1 626)   (1 683)
  Deaths (31)   (35)
  Dismissals (319)   (314)
  Retirements (28)   (17)
  Retrenchments (114)   (92)
Staff complement at the end of the year 9 076   9 058
Staff turnover (%) 23.4   23.9
Casual staff 3 885   3 421

Employee profile


Employment equity

The group’s human resources policies promote the empowerment and advancement of previously disadvantaged people, aimed at creating racial and gender equity.

  • Black staff comprise 86.9% of the total staff complement (2006: 82.7%);
  • 69.2% of management are black;
  • Black staff accounted for 84.0% of new appointments (2006: 82.5%);
  • Women comprise 60.2% of staff (2006: 60.3%);
  • 34.5% of management are women; and
  • 22% of directors are black (2006: 20%), with one female director.

New Clicks an employer of choice

New Clicks was ranked in the top ten large companies in the Deloitte Best Company to Work For survey in 2007. This is the second time that New Clicks has participated in the survey.

Now in its eighth year, the survey covers a range of work-related dimensions including job satisfaction, leadership, management style, communications, trust, values & culture, diversity, change & transformation, rewards and recognition.

The Deloitte ranking is based on independent surveys completed by a representative sample of employees across race, gender and status levels in an organisation. The results are determined by a 15% weighting to the employer and 85% weighting to employees, so the staff ultimately determine whether or not their company is in fact an employer of choice.


Training and skills development

New Clicks invested R16.5 million in training and skills development during the year, equating to 2.76% of the basic payroll cost. This excludes the costs of training and development practitioners, travel, venues and related expenses.

A total of 2 657 of our staff attended training courses, with black employees accounting for 84.4% of the total people trained.

Employee development and training is co-ordinated by the skills development unit within the human resources division. The unit is responsible for compliance with the Skills Development Act and the sector education and training authority (SETA). The group has partial accreditation with the Wholesale and Retail SETA. The healthcare businesses are accredited with the Health and Welfare SETA.

During the year 381 level 2 learnerships, accounting for 4.2% of the staff complement, were registered with the Wholesale and Retail SETA.

Financial assistance of R332 000 was provided to employees for further education. Study loans are provided to employees and repaid over the duration of the course, with the cost being reimbursed on the successful completion of a course.

Building a sustainable pharmacy profession

As one of the country’s leading retail pharmacy chains Clicks is committed to developing future capacity within its pharmacies and contributing significantly to the long-term sustainability of the profession.

Recognising the shortage of pharmacy skills, Clicks established the Pharmacy Healthcare Academy (PHA) in 2003 to manage the skills development needs of the group as well as offering training services to external bodies.

As a registered training provider with the SA Pharmacy Council (SAPC) the Academy works closely with the Health and Welfare SETA and applies a distance learning model, utilising in-store tutors and external trainers.

The Academy offers a range of courses, including a two-year pharmacist’s assistants course, learnership programmes, internship courses and a continuing professional development programme for registered pharmacists.

Our PHA provides the pharmacist’s assistants training course for the Department of Health in the Western Cape and the Free State.

A summary of the courses and participants over the past year is as follows:

Course Learners/ % black
  delegates learners
Pharmacist’s assistants 592 65
Learnership programme 92 86
Internship programme 49 63
Continuing Professional Development programme 517 26

Bertina Engelbrecht
Group human resources director

B Proc, LL M, admitted attorney

Joined the group in July 2006

Previously general manager Shell SA Energy

“Sustainability enhances wealth for shareholders, improves long-term opportunities for employees, creates an increasingly compelling offer for customers while at the same time empowering and uplifting the communities in which we do business”





  

Employee wellness

An employee wellness programme was launched at the start of the 2007 financial year to provide a free counselling service to all permanent staff and their families. Managed by behavioural risk consultancy, ICAS, 19.5% of staff used the programme in the first year, the highest in the retail sector.

Employee wellness programme 2007  
Employee utilisation 1 590
Family utilisation 58
Group trauma participants 182
Total impact rate of programme 19.5%
Cost of programme R3 million

The main components of the programme include:

  • Counselling and advisory services including a 24-hour helpline providing services such as psycho-social counselling, financial, legal and medical advice and family support;
  • HIV management and treatment programme administered by Qualsa, the health risk service provider in the Metropolitan group. The programme provides free HIV testing, antiretroviral treatments, preventative HIV treatment, five free HIV-related doctor visits and blood tests per year, vitamins, counseling and support;
  • Lifecare education training for all employees at head office and stores; and
  • Health awareness events aligned with the national health calendar which provide 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.

HIV/AIDS management

The New Clicks HIV/AIDS policy is based on the core principles of non-discrimination and confidentiality. The group is compliant with all workplace legislation relating to HIV/AIDS and is committed to protecting employees against unfair discrimination on the basis of their HIV status. The right to confidentiality is also guaranteed.

The group-funded HIV workplace programme focuses on education, awareness and support is available to all permanent employees who are not members of a medical aid fund. While the number of staff taking advantage of the voluntary counselling and testing service is low, it is recognised that the programme is still in its infancy.

An actuarial risk assessment conducted by Metropolitan Life in 2006 estimated the HIV prevalence rate of employees to be 8.7%.

Currently 52 employees are receiving treatment on the group’s HIV management and medical aid programmes, translating into approximately 7% of the employees living with HIV/AIDS. While this is low it is in line with most large companies offering HIV management programmes and the programme is in its initial phase.

The group is also exposed to the HIV/AIDS risk from customers. While no formal assessment has been conducted on the impact of the disease on the group’s business and customer base, it is assumed that the published national and regional HIV/AIDS prevalence rates would apply to customers.

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 represents 58% of full-time permanent employees in the Clicks bargaining unit.

While UPD currently has no union recognition agreement, a formal understanding exists with CEPPAWU (Chemical, Energy, Paper, Printing, Wood and Allied Workers’ Union) which is the majority union representing approximately 34% of UPD’s employees. A process has been initiated to formalise this relationship.

The group has focused on building and enhancing relationships with SACCAWU and CEPPAWU, and no trading days were lost to labour action.

Clicks reached a two-year wage settlement from July 2007 to July 2009. UPD concluded a one-year wage agreement while certain substantive conditions such as minimum wages were locked into a two-year agreement.

Occupational health and safety

The Clicks distribution centre in Montague Gardens, Cape Town, received first place in the 2006 National Occupational Safety Association (NOSA) five star system international award in the safety and health category and first place in the regional award in the wholesale and trade retail category.


Investing in the Future accolade for New Clicks

New Clicks was recognised in the prestigious Mail & Guardian Investing in the Future awards when the group won the category Investing in Life (internal workplace policy).

The award acknowledged the scope of the group’s employee wellness programme and its impact on staff. The independent panel of judges commented on the programme:


“One of the objectives of the programme is to make informed lifestyle decisions...”


Transformation

Following the finalisation of the Department of Trade and Industry’s (DTI) codes of good practice on BEE in February 2007, the group conducted a self-assessment and was rated as a level 7 BBBEE contributor. New Clicks is committed to external verification of its transformation status and will commission an independent evaluation in the 2008 financial year.

Transformation rating    
  Possible score 2007 score
Ownership 23 0
Management 11 5
Employment equity 18 11
Skills development 15 11
Preferential procurement 20 1
Enterprise development 15 12
Social economic development 5 2
Total 107 42
2010 target: 100% BEE compliance    

The group has identified the following plans in striving to meet its 2010 targets:

  • Improve level of representation of black senior managers;
  • Identify opportunities for employing people with disabilities;
  • Target 3% learnerships across the group;
  • Engage with major suppliers on transformation strategies;
  • Seek opportunities for enterprise development; and
  • Ensure each business unit has a clear transformation plan.

Corporate social investment

New Clicks is committed to a corporate social investment (CSI) programme that assists in the upliftment of disadvantaged communities and makes a contribution to sustainable development.

The CSI activities across the group are co-ordinated by the New Clicks Foundation. The Foundation is managed by a board of internal trustees comprising the chief executive officer, group human resources director and company secretary. These trustees determine the funding policy, evaluate requests for financial support and monitor the utilisation of funds. Trustees are encouraged to visit the projects to gain an understanding of the needs and challenges facing these organisations.

The Foundation supports projects which encourage self-help and are both empowering and uplifting. Potential beneficiaries seeking financial assistance should be public benefit organisations with professional management which are non-political and not confined to a particular religious group.

In the past year the Foundation invested R427 000 in social programmes.

Priority areas for funding support:

  • Education;
  • Health;
  • Poverty alleviation; and
  • Community upliftment.

The majority of the funding was allocated to specific projects which are aligned with one of the group’s business units, including

  • A skin cancer awareness campaign with CANSA (Clicks);
  • Deaf awareness through DeafSA (Musica); and
  • The Red Cross Children’s Hospital (Clicks).

New Clicks has also been one of the main supporters of the Woodstock Upliftment Project, a programme to address the social challenges facing the community of Woodstock where the group’s head office is located.

A socially responsible investment

New Clicks received a rating of A+ in a social responsibility survey conducted by Unity Incorporation on behalf of the Community Growth Fund (CGF). The CGF is a general equity unit trust fund which aims to provide long-term capital growth while promoting sustainable and responsible investing.

The survey rated the group across a range of sustainability categories, including social and economic empowerment, employment equity, conditions of employment, training and skills development environmental practices and corporate governance.

New Clicks was approved for inclusion in the CGF universe of shares and the fund has subsequently invested in New Clicks.


Enterprise development

UPD outsources distribution to owner/drivers

UPD operates an innovative black empowerment scheme where the majority of distribution is outsourced to self-employed drivers operating their own vehicles.

Delivery agreements have been signed with 106 independent contractors, many of whom are former employees.

These contractors account for 85% of UPD’s deliveries.

UPD maintains an interest in the ongoing business development of these contractors and several of them have been able to successfully expand their contracting businesses.

“New Clicks has committed an additional R10 million to the Foundation for increased social investment in 2008”

  

Customers

In-store primary care clinics

Clicks supports government’s vision of making healthcare more affordable and more accessible. Through its pharmacy network Clicks operates primary care clinics which provide a professional, convenient and affordable alternative for basic medical advice, injections and simple health checks.

Services offered in the clinics include:

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

Customer loyalty programmes


Clicks ClubCard

  • Largest customer loyalty programme in the country
  • 2.2 million active members
  • 70% of sales from ClubCard holders
  • Average basket size of R94 compared to R45 for non-card holders
  • 58% of Clicks dispensary sales are to ClubCard holders
  • R120 million in cash-back vouchers were paid to customers in 2007
  • 29 000 ClubCard credit card holders
  • ClubCard awareness is five times higher than any other loyalty programme

The Body Shop - Love Your Body

  • Over 52 000 members
  • 30% of sales from members of the programme
  • Basket size 50% higher than non-card holders

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.

All investor meetings are formally documented and attended by at least two executives to ensure information is not disclosed on a selective basis.

All information released on SENS is distributed to an extensive database of analysts and investors. Additional non-price sensitive information is communicated regularly to provide operational updates to investors.

Investor relations activities over the past year included:

  • Interim and final results presentations in Cape Town which were broadcast nationally on subscriber television;
  • Results presentations webcast to broaden access to investors locally and offshore;
  • Post-results roadshows to sell-side analysts and institutional investors in Cape Town and Johannesburg;
  • 88 meetings with management and local and international fund managers and analysts;
  • The chief executive undertook an investor roadshow in London, together with an investor relations representative; and
  • Management attended and presented at broker and industry conferences.

  

Environmental sustainability

New Clicks is committed to meeting the needs of its customers and employees in an environmentally sound and sustainable manner. This includes:

  • Accepting responsibility for the safety of products sold through all retail stores;
  • Ensuring the safety of all facets of the group’s operations;
  • Complying with all appropriate environmental legislation and regulation;
  • Encouraging suppliers to reduce the environmental impact of packaging;
  • Reducing waste, conserving energy, optimising water usage and encouraging recycling; and
  • Educating employees on good environmental practice.

795 tons of recycling …

Over the past year 795 tons of paper and cardboard were recycled. This included 484 tons from the three Clicks distribution centres, 131 tons from stores nationally and 180 tons from head office. The group has recycling contracts with two major vendors while the stores generally use local companies.


Sustainability priorities for 2008

  • Investigate inclusion in JSE Socially Responsible Investment 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 transformation and measure progress 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.