Clicks Group Limited · JSE:CLS
Clicks — FY2019 Earnings Presentation
32 slides from Clicks's earnings presentation, October 2019
Slide 1: Annual Results for the Year Ended 31 August 2019
ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2019
Slide 2: Presentation Outline
PRESENTATION OUTLINE ▪ Review of the year ▪ Financial results ▪ Trading performance ▪ Strategy & outlook ▪ Questions CLICKS GROUP ANNUAL RESULTS 2019 2
Slide 3: Review of the Year
REVIEW OF THE YEAR VIKESH RAMSUNDER CLICKS GROUP ANNUAL RESULTS 2019 3
Slide 4: Review of the Year
REVIEW OF THE YEAR ▪ Strong health & beauty sales performance, especially in H2 ▪ Good volume growth, despite consumers being under pressure ▪ Increased market shares ▪ Opened 700th Clicks store ▪ UPD grew margin due to new distribution contracts, offsetting low SEP increase, and gained market share
Slide 5: Review of the Year (continued)
REVIEW OF THE YEAR (CONTINUED) ▪ Customer engagement ▪ Over 8 million active ClubCard members ▪ Voted number 1 in both Health & Beauty Stores and Pharmaceutical Outlets categories* ▪ Investment in people ▪ Further R1.5 billion paid out to beneficiaries of BBBEE share scheme ▪ Company-funded health i
Slide 6: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING CLICKS GROUP ANNUAL RESULTS 2019 6
Slide 7: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Group turnover up 7.2% ▪ Health & Beauty turnover up 10.5% ▪ UPD reported turnover up 4.0% ▪ Operating margin up from 7.0% to 7.4% ▪ Diluted HEPS up 16.8% to 672.2 cps ▪ Cash generated by operations R2.9 billion ▪ Return on equity at 36.5% ▪ Total dividend of 445 cps, up 17.1%
Slide 8: Sustained Financial Performance
SUSTAINED FINANCIAL PERFORMANCE 65% 62% 60% 672 59% 59% 56% 56% 56% 10-year 575 CAGRs 50% 50% 502 439 445 Diluted HEPS: 384 380 15.0% 337 322 298 273 272 250 235 Dividend per 211 168 190 share: 18.1% 125 152 106 Total shareholder - 20% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 return**: 28.6
Slide 9: Growth in Turnover, Profit and Margin
GROWTH IN TURNOVER, PROFIT AND MARGIN 7.4% 7.0% 6.8% 31 352 000 6.5% 300 29 239 6.3% 000 26 809 24 171 2 321 250 000 22 070 2 032 1 814 200 000 1 572 000 1 396 150 000 100 000 500 000 - 0 2015 2016 2017 2018 2019 Turnover (R'm) Operating profit (R'm) Operating margin CLICKS GROUP ANNUAL RESULTS 2019
Slide 10: Turnover
TURNOVER % same R′m % % 2019 2018* change stores inflation growth Retail 23 105 21 062 9.7 6.4 1.5 Health & Beauty 10.5 Musica (11.7) Distribution 13 909 13 376 4.0 0.9 Intragroup turnover (5 662) (5 199) 8.9 Total group 31 352 29 239 7.2 1.2 ▪ Strong volume growth in health and beauty brands ▪ UPD
Slide 11: Total Income
TOTAL INCOME 2019 2018* % 2019 2018* R′m R′m change % margin % margin Retail 7 692 7 070 8.8 33.3 33.6 Distribution 1 137 982 15.8 8.2 7.3 Intragroup (178) (167) Total group 8 651 7 885 9.7 27.6 27.0 ▪ Retail margin growth impacted by mix and increased transport costs ▪ UPD benefited from new contra
Slide 12: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R′m 2019 2018 % change Depreciation and amortisation 330 285 15.9 Occupancy costs 1 010 926 9.1 Employment costs 3 072 2 853 7.7 Other operating costs 1 398 1 311 6.6 Total retail costs 5 810 5 375 8.1 % of turnover 25.1% 25.5% ▪ Depreciation and occupancy costs driven
Slide 13: Operating Expenditure - Distribution
OPERATING EXPENDITURE - DISTRIBUTION R′m 2019 2018 % change Depreciation and amortisation 38 35 10.1 Occupancy costs 4 3 28.4 Employment costs 270 242 11.3 Other operating costs 370 339 9.2 Total distribution costs 682 619 10.2 ▪ Includes costs related to new bulk distribution clients ▪ Expenses con
Slide 14: Operating Profit
OPERATING PROFIT 2019 2018* % 2019 2018* R′m R′m change % margin % margin Retail 1 881 1 695 11.0 8.1 8.0 Distribution 454 362 25.4 3.3 2.7 Intragroup (14) (25) Total group 2 321 2 032 14.2 7.4 7.0 ▪ Both divisions leveraged margin despite low inflationary environment * Restated for IFRS 9 and IFRS
Slide 15: Inventory
INVENTORY Days in stock Inventory (R′m) 2019 2018 2019 2018* % change Retail 72 71 3 255 2 935 10.9 Distribution 41 38 1 536 1 383 11.1 Intragroup inventory (81) (67) Total group 70 67 4 710 4 251 10.8 ▪ Impact of new retail stores ▪ Net working capital days improved from 36 to 34 days ▪ Investing i
Slide 16: Cash Management
CASH MANAGEMENT 203 59 134 2 733 (262) (647) R'm 62 1 090 (981) (211) Operating Working Net Taxation Net Capex Dividends Share Other Net profit before capital finance settlement buybacks financing increase working movements income of and in cash capital derivative investing activities ▪ Accounts pay
Slide 17: Capital Expenditure
CAPITAL EXPENDITURE ▪ R718m capex planned for FY2020 ▪ R404m on stores, including: - 25 – 30 new Clicks stores - 30 – 35 new pharmacies - 60 store refurbishments ▪ R314m on infrastructure, including: - R83m on UPD IT and warehouse equipment - R231m on retail systems and infrastructure ▪ Approximatel
Slide 18: Trading Performance
TRADING PERFORMANCE VIKESH RAMSUNDER CLICKS GROUP ANNUAL RESULTS 2019 18
Slide 19: Health & Beauty Sales Performance
HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 9.6 30.5 Front shop health 10.8 23.6 Beauty and personal care 9.6 30.0 General merchandise 13.4 15.9 Total turnover 10.5 100.0 ▪ Comparable stores turnover growth of 6.9% ▪ Inflation only 1.1% ▪ Volume growth of 5.8% CLICKS GROUP ANN
Slide 20: Market Share Gains
MARKET SHARE GAINS % Aug 2019 Aug 2018 Health Retail pharmacy* 24.9 23.9 Front shop health** 31.4 31.2 Baby** 17.0 16.0 Beauty Skincare** 37.6 36.3 Haircare** 29.5 28.4 Personal care** 17.9 17.0 General merchandise Small electrical appliances*** 16.4 14.4 * Per IQVIA (Private Retail Pharmacy S1-6) (
Slide 21: Performance and Strategy: Maintaining Value
PERFORMANCE AND STRATEGY ▪ Maintaining value ▪ Price competitive with Clicks price index* vs: all national retailers Retailer A 98.5% ▪ Promotional sales +19.5% Retailer B 95.7% to 38.4% of turnover Retailer C 98.0% Retailer D 98.1% ▪ R504 million cashback paid to * Excluding 3 for 2 promotions Club
Slide 22: Performance and Strategy: Differentiating Our Product Offer
PERFORMANCE AND STRATEGY ▪ Differentiating our product offer ▪ Private label maintained at 22% of sales (front shop 29.1%, pharmacy 7.1%) ▪ 1 920 new SKUs ▪ Launched higher tier private label – Clicks Expert range ▪ GNC sales +30.4% ▪ The Body Shop sales in Clicks +14.8% CLICKS GROUP ANNUAL RESULTS
Slide 23: Performance and Strategy: Engaging Customers
PERFORMANCE AND STRATEGY ▪ Engaging customers through personalisation ▪ 8.1m active ClubCard members, 77.6% of sales ▪ 476 000 Baby Club members (+7%) ▪ 1.1m Seniors Club members (+20%) ▪ Clicks app downloaded by 525 000 customers ▪ Online-only product ranges – Premium beauty – Baby hardware – Healt
Slide 24: Performance and Strategy: Extending Convenience
PERFORMANCE AND STRATEGY ▪ Extending convenience ▪ 704 Clicks stores with 545 pharmacies Format Opened Total ▪ 51% of customers < 6km of a pharmacy Convenience 38 519 ▪ 76 SA stores still to get a dispensary Destination 3 185 ▪ 56 Clicks stores refurbished Total 41 704 ▪ Online is the fastest growin
Slide 25: UPD: We Deliver Healthcare
UPD WE DELIVER HEALTHCARE
Slide 26: Fine Wholesale Turnover
FINE WHOLESALE TURNOVER Independent Other channels pharmacies (-14.0%) (+13.9%) 1.5% 15.9% 3.7% 3.7% 14.3% 14.3% Private 27.3% 52.2% 55.3% Clicks hospitals 29.8% 52.2% (+8.4%) 29.8% (+1.6%) ▪ Wholesale turnover up 6.8% ▪ Wholesale market share up from 26.0% to 27.0%* * MAT per IQVIA CLICKS GROUP ANN
Slide 27: Review of the Year (UPD)
REVIEW OF THE YEAR ▪ Total managed turnover +17.6% to R21.1bn ▪ Annualised 3 clients gained in FY2018 ▪ 4 new distribution contracts in FY2019 ▪ Generic medicines +11.0% (68% of volume) ▪ Extending distribution capacity in Gauteng with rented DC ▪ Investment in IT platform and warehouse management s
Slide 28: Strategy & Outlook
STRATEGY & OUTLOOK VIKESH RAMSUNDER
Slide 29: Group Strategy
GROUP STRATEGY ▪ Retail focus will be on delivering: Goal of 900 25 - 30% share for Clicks stores in private label and South Africa exclusive brands ▪ Further opportunities to grow UPD ▪ Continued investment in supply chain, IT and people CLICKS GROUP ANNUAL RESULTS 2019 29
Slide 30: Outlook for FY2020
OUTLOOK FOR FY2020 ▪ Consumer environment will remain highly constrained ▪ Confident of sustaining volume growth ▪ Selling price inflation expected to remain low for H1 ▪ 2020 SEP increase should be slightly higher than 2019 ▪ Health & beauty markets are growing and defensive ▪ Strategy and business
Slide 31: Thank You
THANK YOU
Slide 32: 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