Clicks Group Limited · JSE:CLS

Clicks — FY2015 Earnings Presentation

36 slides from Clicks's earnings presentation, October 2015

  1. Slide 1: Annual Results for the Year Ended 31 August 2015

    ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2015

  2. Slide 2: Presentation Outline

    PRESENTATION OUTLINE  Review of the year  Financial results  Trading performance  Outlook  Questions CLICKS GROUP ANNUAL RESULTS 2015 2

  3. Slide 3: Review of the Year

    REVIEW OF THE YEAR DAVID KNEALE

  4. Slide 4: Review of the Year

    REVIEW OF THE YEAR  Another good trading performance  All retail brands showing volume growth  Resilient health and beauty markets  Clicks continues to gain market share  UPD market leader in wholesale and distribution  A record year of investment  R667m returned to investors  Diluted headli

  5. Slide 5: Financial Results

    FINANCIAL RESULTS MICHAEL FLEMING

  6. Slide 6: Financial Highlights

    FINANCIAL HIGHLIGHTS  Group turnover up 15.3%  Clicks turnover up 10.9%  UPD turnover up 21.6%  Operating margin at 6.3%  Diluted HEPS up 14.0% to 383.9 cps  Cash generated by operations R1.7 billion  Total dividend of 235.0 cps, up 23.7%  Total shareholder return of 35.8%  Return on equity

  7. Slide 7: Sustained Financial Performance

    SUSTAINED FINANCIAL PERFORMANCE 59% 450 56% 56% 56% 400 50% 383.9 350 336.8 298.3 300 273.4 249.7 235.0 (cents) 250 190.0 200 168.0 152.0 150 125.0 100 50 - 2011 2012 2013 2014 2015 Dividend per share Diluted HEPS Dividend payout ratio*  5-year CAGR in diluted HEPS of 12.7% and DPS of 17.2% * Based

  8. Slide 8: Turnover

    TURNOVER % same R′m % % 2015 2014 change store inflation growth Clicks 13 696 12 346 10.9 7.9 4.3 Musica 895 874 2.3 1.3 0.2 The Body Shop 167 149 12.7 9.4 2.8 Total retail 14 758 13 369 10.4 7.5 4.0 UPD 10 415 8 563 21.6 4.2 Intragroup turnover (3 103) (2 783) 11.5 Total group 22 070 19 149 15.3 4.

  9. Slide 9: Total Income

    TOTAL INCOME 2015 2014 % 2015 2014 R′m R′m change % margin % margin Retail 5 018 4 513 11.2 34.0 33.8 Distribution 809 729 11.0 7.8 8.5 Intragroup (92) (70) Total group 5 735 5 172 10.9 26.0 27.0  Well managed promotional activity and private label margin growth in Clicks  Impact of business mix i

  10. Slide 10: Operating Expenditure - Retail

    OPERATING EXPENDITURE - RETAIL R′m 2015 2014 % change Depreciation and amortisation 210 195 8.1 Occupancy costs 617 560 10.2 Employment costs 2 033 1 828 11.2 Other operating costs 1 007 930 8.2 Total retail costs 3 867 3 513 10.1  Pharmacy professional costs up 11.8%  Staff turnover down from 24%

  11. Slide 11: Operating Expenditure - Distribution

    OPERATING EXPENDITURE - DISTRIBUTION R′m 2015 2014 % change Depreciation and amortisation 27 25 8.1 Occupancy costs 3 6 (43.4) Employment costs 222 205 8.3 Other operating costs 298 272 9.6 Total distribution costs 550 508 8.4  Increased variable costs from growth in distribution business  Compara

  12. Slide 12: Operating Profit

    OPERATING PROFIT 2015 2014 % 2015 2014 R′m R′m change % margin % margin Retail 1 151 1 000 15.1 7.8 7.5 Distribution 258 221 17.0 2.5 2.6 Intragroup (13) (3) Total group 1 396 1 218 14.6 6.3 6.4  Retail accounts for 82% of group profit  Margins within target ranges CLICKS GROUP ANNUAL RESULTS 2015

  13. Slide 13: Inventory

    INVENTORY Days in stock Inventory (R′m) 2015 2014 2015 2014 % change Retail 71 70 2 024 1 799 12.5 Distribution 45 36 1 256 825 52.2 Intragroup inventory (30) (10) Total group 68 64 3 250 2 614 24.3  Record availability of 97.5% in Clicks  Additional stock for new franchise brands  UPD stock high

  14. Slide 14: Cash Management

    CASH MANAGEMENT 2 000 1 800 1 700 1 600 (15) (39) 1 400 1 200 (356) R'm 1 000 800 (370) 600 400 (491) 200 (176) (48) - Operating Working Net finance Taxation Capex Dividends Share buy- Other profit before capital costs backs financing working movements and capital investing activities CLICKS GROUP A

  15. Slide 15: Capital Management

    CAPITAL MANAGEMENT  Group will remain cash generative  Focus on optimising inventory management  R432m capex planned for FY2016  R227m on store refurbishments, new stores and pharmacies  R167m retail infrastructure  R38m UPD  Return surplus cash to shareholders CLICKS GROUP ANNUAL RESULTS 201

  16. Slide 16: Medium-Term Financial Targets

    MEDIUM-TERM FINANCIAL TARGETS Achieved 2016 – 2018 in 2015 target ROE (%) 53.7 50 – 60 ROA (%) 14.0 14 – 18 Inventory days 68 55 – 60 Group operating margin (%) 6.3 6.0 – 7.0 Retail 7.8 7.0 – 8.0 Distribution 2.5 2.0 – 2.5* * Excluding any SEP trading gains CLICKS GROUP ANNUAL RESULTS 2015 16

  17. Slide 17: Trading Performance

    TRADING PERFORMANCE DAVID KNEALE

  18. Slide 18: Sales Performance

    SALES PERFORMANCE % change % contribution Pharmacy 12.8 27.5 Front shop health 15.3 23.0 Beauty and personal care 10.1 32.1 General merchandise 4.5 17.4 Total turnover 10.9 100.0  Driving volumes through value offering  Promotions now 29% of sales  More price competitive than ever before CLICKS G

  19. Slide 19: Pharmacy and Front Shop Health

    PHARMACY AND FRONT SHOP HEALTH  Pharmacy  Continued switch to generics +19.0% (45.4% of sales)  OTC medicines +15.6%  Front shop health  Good growth in all categories: medicines +11.9%, supplements +11.9%, first aid & diagnostics +17.3%  Continuing strong growth in baby +20.3%  Market shares

  20. Slide 20: Beauty and General Merchandise

    BEAUTY AND GENERAL MERCHANDISE  Beauty and personal care  Continued range extension in fragrance +22.1%  Good growth in colour cosmetics +12.6% & skincare +10.2%  Haircare +5.5%  General merchandise  Non-core categories -20.0%  Domestics +13.7%, confectionery +9.6%  Electrical +5.7%  Market

  21. Slide 21: Customers and Stores

    CUSTOMERS AND STORES  5 million active ClubCard members, 75% of sales  Very positive response from customers to cashback on card  Private label up from 19.0% to 19.8%  Front shop at 25.7%  361 pharmacies and 157 clinics in 486 stores at 31 August  24 stores outside SA  Net 22 new stores and n

  22. Slide 22: Outlook

    OUTLOOK  Continued focus on delivering the brand proposition  Value – stay price competitive, effective promotions  Differentiated product ranges – ultimate goal of 25% private label and exclusive brands  Continue to improve customer care  Rewards – target of 5.5m ClubCard members  Increase en

  23. Slide 23: Clicks Group Annual Results 2015

    CLICKS GROUP ANNUAL RESULTS 2015 23

  24. Slide 24: Franchise Brands

    FRANCHISE BRANDS  Portfolio of exclusive brands adding differentiation to Clicks offer  Claire’s launched in July 2015  Leading specialty retailer in fashionable jewellery and accessories  1 standalone store and now in 77 Clicks stores  Roll out of GNC continues  4 standalone stores and presen

  25. Slide 25: Franchise Brands continued

    FRANCHISE BRANDS continued  Loyal customer base – 59% of sales from 164 000 Love Your Body cardholders  Bigger focus on skincare +17.4%  Bath & shower +14.3% and bodycare +13.0% benefited from new product launches  Continuing to expand the footprint  50 standalone stores – 2 new stores in H1 20

  26. Slide 26: Clicks Group Annual Results 2015

    CLICKS GROUP ANNUAL RESULTS 2015 26

  27. Slide 27: Performance

    PERFORMANCE Market share* % change % contribution Aug 2015 Aug 2014 CDs 0.4 39.9 60.8 50.9 DVDs (4.3) 26.3 43.3 34.6 Gaming 10.7 17.0 13.0 10.4 Technology 10.9 16.8  Market share growth continues in all categories  Strong performance in gaming (new console releases) and technology (expanded ranges

  28. Slide 28: We Deliver Healthcare

    WE DELIVER HEALTHCARE P 7 — i } ’

  29. Slide 29: Growth in Scale

    GROWTH IN SCALE 16 15.2 14 12.5 12 11.3 10 8.0 R'bn 8 6.2 6 4 2 - 2011 2012 2013 2014 2015  4-year CAGR of 25.1% in total managed turnover CLICKS GROUP ANNUAL RESULTS 2015 29

  30. Slide 30: Fine Wholesale Turnover

    FINE WHOLESALE TURNOVER % change % contribution Clicks 10.7 41.4 Hospitals 7.5 31.9 Independent pharmacy 2.3 19.0 Other channels 3.9 7.7 Fine wholesale turnover 7.4 100.0  Strong growth from core customers  Wholesale market share 25.2%* * MAT per IMS CLICKS GROUP ANNUAL RESULTS 2015 30

  31. Slide 31: Performance

    PERFORMANCE  A year of strong growth in distribution  34.6% growth in distribution turnover  Distribution now 51% of UPD  Now servicing 22 distribution clients – gained 6 and lost 2  Continued margin pressure from product mix  Generics increased from 40.5% to 45.7% of reported turnover  Costs

  32. Slide 32: Outlook

    OUTLOOK  Wholesale market share to increase with core customers’ growth  Margin pressure from faster growth in generics and lower SEP increase  No significant additional contract opportunities in distribution this year  Focus on becoming more efficient  Improved business processes, quality mana

  33. Slide 33: Outlook

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  34. Slide 34: Outlook

    OUTLOOK  A challenging environment  A demanding year for UPD  Consumer climate to remain unchanged  Good portfolio of brands  Continued investment for long-term sustainability  Confident of group’s ability to deliver on targets CLICKS GROUP ANNUAL RESULTS 2015 34

  35. Slide 35: Thank You

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  36. Slide 36: Disclaimer

    DISCLAIMER Clicks Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this presentation, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities

Clicks Group — FY2015 Earnings Presentation on 6ix