Clicks Group’s resilience in tough consumer environments was proven again in the year to August 2024 after it lifted trading profit by 15.1% to R4.2 billion for the year to August 2024, expanding margins, generating strong cash flows and delivering industry-leading shareholder returns.
The results were above management expectations and continued a trend where the group has produced an 18.5% compound annual growth rate in shareholder returns over 10 years, which was well ahead of the average 5.1% return of the Top 40 companies over the same period and 7.1% return from the group's peers, CEO Bertina Engelbrecht said in an interview yesterday.
“We have long term shareholders and they have done well. Our biggest shareholder is the PIC (Public Investment Corporation), and we are one stock that the Government Employee Pension Fund has done well out of,” she said.
Paul Steegers, Nedbank Corporate and Investment Banking senior equity research analyst said the results came in slightly ahead of consensus expectations at earnings level and marginally below their top of the range estimates.
“The group has raised its medium term Retail divisional and group operating margin target range and management appears confident of further growth opportunities driven by attractive new store roll-out potential and same store growth. Clicks’ balance sheet remains robust with net cash balances and its return profile is best in class,” he said,
In the past year the dividend was raised by 14.3% to 776 cents a share. The group returned R2.5bn to shareholders in dividend payments, and including some R835 million in share buybacks, through the year.
Engelbrecht said in an interview that since the formation of the Government of National Unity, there was increased confidence among consumers, and this had translated into increased sales trends at the group in the period after the August year end, both at the stores and at pharmaceutical distributor UPD.
She said the medium-term outlook for the consumer environment was increasingly positive, although spending was expected to remain muted in the short-term.
“Several factors are supporting improved consumer sentiment, which should ultimately translate into increased spending. These include lower inflation, interest rate relief, declining fuel costs, the strengthening currency and the extended absence of load shedding,” Engelbrecht said.
She said the group had been carefully positioned to trade profitably through the tough economic conditions of the recent past and was consequently well positioned to grow should economic conditions improve.
In the past year retail turnover grew 11.7% with group turnover up 9.2% to R45.4bn. The group trading margin expanded by 50 basis points to 9.2%. Headline earnings increased 11.9% to R2.8bn with diluted headline earnings a share increasing 14.3%.
The market capitalisation on the JSE increased 34.9% to R89bn at year end while the return on equity improved from 43.6% to 46.4%. Cash generated by operations totalled R6bn and the group held cash of R2.7bn at year end.
Engelbrecht said the past year's performance highlighted the resilience of its business model and the defensiveness of its product offering.
Clicks made market share gains, which had been independently determined, across all its core health and beauty product categories, she said.
Retail pharmacy market share increased to 24.2% from 23.7% and front shop health market share grew to 34.2% from 33.1%.
In beauty and personal care, the skincare market share increased to 43.8% from 42.7%. Private label product sales grew 13.5% and accounted for 30% of front shop sales in Clicks.
The Clicks ClubCard loyalty programme grew membership by 1.4 million to 11.8m, contributing 82% of sales in Clicks. ClubCard customers received R780m in cashback rewards during the year.
Clicks increased its store base to 936 - 51 stores were opened and the pharmacy network increased to 720 following the opening of 9 new pharmacies.
The number of pharmacy openings was lower than expected due to the Unicorn licensing matter, which was resolved by the Department of Health in the past year - pharmacy licences were again being issued.
Clicks plans to open 40 to 50 new stores and pharmacies for the 2025 financial year, with the medium-term target of expanding to 1 200 stores.
UPD grew turnover by 3.3% and was well positioned to regain wholesale market share following the improved performance in the second half and the momentum being carried into the 2025 financial year.
BUSINESS REPORT