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directors' report


Your directors have pleasure in presenting their report together with the financial statements of the company and of the group for the year ended 31 August 2006.

Nature of business

The company is an investment holding company listed in the Cyclical Services: General Retailers sector of the JSE Limited. Its subsidiaries as a group comprise the country’s leading provider of health, beauty and lifestyle merchandise through a network of more than 660 stores in southern Africa. The company’s subsidiaries encompass the entire pharmaceutical supply chain from wholesale distribution to retail pharmacy.

Certain subsidiaries operate as franchisers in addition to their retail activity. The company is the sole shareholder of certain property-owning subsidiaries.

Group financial results

The results of operations for the year are set out in the consolidated income statement. The profit attributable to ordinary shareholders for the year is R246 million (2005: R179 million).

Share capital

During the year under review the issued share capital was increased by the issue of the following ordinary shares of 1 cent each.

495 250 issued at various dates during the year at a premium of 349 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in October 1998.
6 825 350 issued at various dates during the year at a premium of 534 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in January 1999.
525 000 issued at various dates during the year at a premium of 779 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in July 1999.
1 180 000 issued at various dates during the year at a premium of 929 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in September 2000.
974 000 issued at various dates during the year at a premium of 739 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in April 2001.
952 500 issued at various dates during the year at a premium of 669 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in July 2002. 
125 000 issued at various dates during the year at a premium of 569 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in October 2002. 
710 000 issued at various dates during the year at a premium of 649 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in January 2003. 
372 500 issued at various dates during the year at a premium of 629 cents per share, pursuant to the company’s obligations to deliver ordinary shares to Share Trust participants in respect of share options granted in August 2003.
12 159 600
The following ordinary shares of 1 cent each, held as treasury shares by a subsidiary of the company, were bought back into the company and cancelled. 
26 931 767 cancelled on 17 May 2006
The following ordinary shares of 1 cent each were repurchased during the year by a subsidiary of the company and are now held as treasury shares.
5 065 863 in respect of the general repurchases between 18 May 2006 and 14 July 2006.

Distributions to shareholders

Interim

The directors proposed a cash distribution by way of a reduction of share premium of 11.2 cents per share for the six months ended 28 February 2006, which was approved by shareholders at a General Meeting held on 9 June 2006. The distribution was paid on 3 July 2006 to shareholders registered on 30 June 2006.

Final

The directors have approved a distribution of 22 cents per share comprising a final cash dividend of 6.8 cents per share and a distribution out of share premium of 15.2 cents per share, payable on 18 December 2006 to shareholders registered on 15 December 2006.

Group restructure

During the year the company completed the process of restructuring the operations of certain of its subsidiary companies. The primary objective of this restructuring is to ensure compliance with certain pharmacy regulations. As the restructuring took place between existing subsidiary companies, the financial position of the group is unaffected.

Events subsequent to balance sheet date

No significant events, other than the approval of the final distribution, as set out above, took place between the end of the financial year under review and the date of this report.

Directors and secretary

The names of the directors in office at the date of this report are set out here and the company secretary’s details are given here.

Appointments

On 10 April 2006 Peter Eagles and Martin Rosen were appointed as non-executive directors and Michael Harvey, David Kneale and Keith Warburton were appointed as executive directors. Roy Smither was appointed as a non-executive director on 20 September 2006.

Resignations

Raymond Godfrey resigned as an executive director on 31 December 2005. Trevor Honneysett resigned as an executive director on 23 January 2006. Peter Swartz and Allen Zimbler resigned as non-executive directors on 10 April 2006.

In accordance with the company’s articles of association Messrs RL Lumb, PFK Eagles, M Rosen, RV Smither, E Osrin, DA Kneale, KDM Warburton and MJ Harvey retire at the forthcoming annual general meeting. With the exception of Mr E Osrin, who is not standing for re-election, the retiring directors, being eligible, offer themselves for re-election.

Directors’ interest in shares

Details of the directors’ beneficial interests in the company’s issued share capital are given here.

Details of the share options granted to directors are given here.

Share incentive scheme

Information relating to the share incentive scheme is set out in note 18.

Special resolutions

No special resolutions of a material nature have been passed by the company or its subsidiaries since the last annual general meeting of the company.

Holding company

The company has no holding company.

Subsidiary companies

The names of the company's main subsidiaries and financial information relating thereto appear here.

The interest of the company in the aggregate income after taxation before goodwill amortisation and impairment of its subsidiaries is R228 million (2005: R177 million).