Clicks Group Limited · JSE:CLS
Clicks — FY2021 Earnings Presentation
37 slides from Clicks's earnings presentation, October 2021
Slide 1: Annual Results for the Year Ended 31 August 2021
ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2021
Slide 2: Presentation Outline
PRESENTATION OUTLINE ▪ Review of the year ▪ Financial results ▪ Trading performance ▪ Strategy & outlook ▪ Questions CLICKS GROUP ANNUAL RESULTS 2021 2
Slide 3: Review of the Year
REVIEW OF THE YEAR VIKESH RAMSUNDER CLICKS GROUP ANNUAL RESULTS 2021 3
Slide 4: Review of the Year
REVIEW OF THE YEAR ▪ Trading impacted by Covid-19 and civil unrest ▪ Vaccine rollout gaining momentum, with Clicks’ 525 sites doing almost 1.4 million vaccinations to date ▪ Opened 750th Clicks store ▪ Closure of Musica ▪ Strong growth in UPD ▪ Performance highlights the resilience and defensiveness
Slide 5: Impact of Civil Unrest in July 2021
IMPACT OF CIVIL UNREST IN JULY 2021 ▪ 53 stores in KZN and Gauteng were looted and vandalised = 6% of store base ▪ 34 stores reopened by 31 August, a further 11 opened since, and 8 remain closed – 7 to open in FY2022 and 1 in FY2023 ▪ The UPD and Clicks DCs in KZN were both looted and damaged Clicks
Slide 6: Impact of Civil Unrest in July 2021
IMPACT OF CIVIL UNREST IN JULY 2021 ▪ Store closures due to damages and temporary store closures resulted in R250m in estimated lost sales in FY2021 ▪ Claim for business interruption cover not yet finalised ▪ Trading in affected areas remains well below the previous year Clicks store, Pinetown CLICK
Slide 7: Review of the Year
REVIEW OF THE YEAR ▪ Sustained strong cash generation ▪ Focus on innovation in technology, products and service ▪ Investment in new stores, pharmacies, supply chain and IT ▪ ESG integrated into ways of working ▪ Recognised as Top Employer* in retail sector for 5th year ▪ Board succession plan – new
Slide 8: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING CLICKS GROUP ANNUAL RESULTS 2021 8
Slide 9: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Turnover up 10.2%* ▪ Retail Health & Beauty turnover up 8.3% ▪ UPD reported turnover up 12.3% ▪ Operating margin from 8.3% to 8.2%* ▪ Group diluted HEPS up 2.6% to 773.6 cps ▪ Continuing adjusted dHEPS up 8.8%* ▪ Cash of R4.6 billion generated by operations ▪ R2.2bn returned t
Slide 10: Impact of Civil Unrest in July 2021
IMPACT OF CIVIL UNREST IN JULY 2021 ▪ SASRIA claim of R726m ▪ Stock of R522m (carrying value R334m) ▪ Replacement of fixed assets of R181m (carrying value R61m) ▪ Costs of R23m ▪ Additional costs for private security services to protect the DCs and air transportation costs to supply UPD customers in
Slide 11: Impact of Civil Unrest & Insurance Claim
IMPACT OF CIVIL UNREST & INSURANCE CLAIM Continuing operations Reported Adjusted R′m Adjustment 2021 2021 Turnover 37 339 - 37 339 Gross profit 7 272 334 Stock written off 7 606 Other income 2 609 (217) Insurance claim received to date 2 392 Expenses (6 984) 31 Costs relating to (6 953) civil unrest
Slide 12: Turnover
TURNOVER % same R′m % % 2021 2020 change stores inflation growth Retail health & beauty 26 329 24 310 8.3 5.1 3.2 Distribution 17 378 15 474 12.3 1.9 Intragroup turnover (6 368) (5 895) 8.0 Total group 37 339 33 889 10.2 2.7 ▪ Comparable volume growth in retail despite impact of Covid-19 and economi
Slide 13: Total Income
TOTAL INCOME 2021 2020 % 2021 2020 R′m R′m change % margin % margin Retail health & beauty 8 746 8 095 8.1 33.2 33.3 Distribution 1 494 1 317 13.4 8.6 8.5 Intragroup (243) (191) Total group 9 997 9 221 8.4 26.8 27.2 ▪ Retail margin impacted by mix and promotions ▪ UPD benefited from new contracts, o
Slide 14: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R′m 2021 2020 % change Depreciation – PP&E 399 366 9.3 Depreciation – ROU asset 744 660 12.7 Occupancy costs 160 166 (3.8) Employment costs 3 358 3 130 7.3 Other operating costs 1 576 1 467 7.4 Total retail costs 6 237 5 789 7.7 % of turnover 23.7% 23.8% Finance costs
Slide 15: Operating Expenditure - Distribution
OPERATING EXPENDITURE - DISTRIBUTION R′m 2021 2020 % change Depreciation – PP&E 30 36 (17.2) Depreciation – ROU asset 6 4 75.1 Occupancy costs 3 3 (5.1) Employment costs 301 289 4.2 Other operating costs 584 472 23.6 Total distribution costs 924 804 14.9 ▪ Impact of costs related to new wholesale an
Slide 16: Operating Profit
OPERATING PROFIT 2021 2020 % 2021 2020 R′m R′m change % margin % margin Retail 2 509 2 306 8.8 9.5 9.5 Distribution 569 513 11.0 3.3 3.3 Intragroup (34) (6) Total group 3 045 2 813 8.2 8.2 8.3 ▪ Both divisions did extremely well to hold margin, but faster growth of UPD impacted group margin Note: Co
Slide 17: Inventory
INVENTORY Days in stock Inventory (R′m) 2021 2020 2021 2020 % change Retail 74 71 3 913 3 435 13.9 Distribution 35 38 1 657 1 573 5.4 Intragroup inventory (121) (87) Total group 66 66 5 449 4 921 10.7 ▪ Retail inventory days impacted by restocking of KZN DC ▪ Net working capital days improved from 3
Slide 18: Cash Management
CASH MANAGEMENT ▪ Secured extended creditor terms while waiting for insurance payout CLICKS GROUP ANNUAL RESULTS 2021 18
Slide 19: Capital Expenditure
CAPITAL EXPENDITURE ▪ R846m capex planned for FY2022, including R168m for replacement of assets damaged in the civil unrest and R46m carried forward from FY2021 ▪ R495m on stores, including: - 25 – 30 new Clicks stores and 30 – 35 new pharmacies - 45 normal store refurbishments ▪ R351m on infrastruc
Slide 20: Medium-Term Financial Targets
MEDIUM-TERM FINANCIAL TARGETS Achieved Medium-term in FY2021 target ROE (%) 38.2 40 – 50 ROIC (%) 25.9 20 – 30 ROA (%) 11.8 11 – 15 Net working capital days 30 30 – 35 Group operating margin (%) 8.2* 8.0 – 9.0 Retail health & beauty 9.5* 9.0 – 10.0 Distribution 3.3* 2.8 – 3.3 Dividend payout ratio (
Slide 21: Growth in Turnover, Profit and Margin
GROWTH IN TURNOVER, PROFIT AND MARGIN Operating profit margin * Total operations, pre-IFRS 16 operating profit and margin ** Continuing operations, FY2021 adjusted for impact of civil unrest CLICKS GROUP ANNUAL RESULTS 2021 21
Slide 22: Sustained Financial Performance
SUSTAINED FINANCIAL PERFORMANCE 10-year CAGRs Total shareholder return³: 24.5% Diluted HEPS: 12.0% Dividend per share: 14.6% ¹ Pre-IFRS 16 ² Based on HEPS ³ Based on reinvestment of dividends paid and the closing share price CLICKS GROUP ANNUAL RESULTS 2021 22
Slide 23: Trading Performance
TRADING PERFORMANCE VIKESH RAMSUNDER CLICKS GROUP ANNUAL RESULTS 2021 23
Slide 24: Health & Beauty Sales Performance
HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 10.2 29.5 Front shop health 14.8 27.7 Beauty and personal care 4.5 27.9 General merchandise 1.0 14.9 Total turnover 8.3 100.0 ▪ Comparable stores turnover growth of 5.1% ▪ Inflation 3.2% ▪ Volume growth of 1.9% ▪ Administered 596 180
Slide 25: Market Shares
MARKET SHARES % Aug 2021 Aug 2020 Health Retail pharmacy* 23.4 23.6 Front shop health** 32.5 31.8 Baby** 19.6 18.5 Beauty Skincare** 40.7 40.3 Haircare** 30.9 30.8 Personal care** 18.8 18.0 General merchandise Small electrical appliances*** 17.1 19.0 * Per IQVIA (Private Retail Pharmacy S1-6) (resta
Slide 26: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Maintaining value Clicks price index* vs: Retailer A 93.5% ▪ Price competitive with Retailer B 97.2% all national retailers Retailer C 97.6% ▪ Promotional sales +11.7% Retailer D 100.0% to 41.5% of turnover * Excluding 3 for 2 promotions ▪ R545 million cashback paid to Clu
Slide 27: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Differentiating our product offer ▪ Private label up from 23.8% to 24.5% of sales (front shop 30.1%, pharmacy 9.7%) ▪ Trialling standalone baby store to showcase online range ▪ The Body Shop sales in Clicks +5.2%, but standalone stores -4.1% ▪ The Body Shop contract extend
Slide 28: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Engaging customers through personalisation ▪ 9.2m active ClubCard members, 80.2% of sales ▪ Clicks app downloaded by 2.3m customers ▪ Continued investment in online ▪ Partnership with ARC ▪ Voted best loyalty programme¹ ▪ Coolest health and beauty brand² 1 South African Lo
Slide 29: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Extending convenience Format Total** ▪ 782 Clicks stores with 621 pharmacies* Convenience 581 ▪ 50% of population < 5.5km of a pharmacy Destination 201 ▪ Online sales grew 46.9%, but only Total 782 1.4% of front shop sales ▪ Trial of digital pharmacy lockers ▪ Received com
Slide 30: We Deliver Healthcare
WE DELIVER HEALTHCARE
Slide 31: Fine Wholesale Turnover
FINE WHOLESALE TURNOVER Independent pharmacies & other channels (-3.5%) 14.5% 45.3% Private Clicks hospitals 40.2% (+6.3%) (+37.5%) ▪ Wholesale turnover up 15.1% ▪ Annualisation of new buying groups ▪ Strong growth in hospital activity linked to second and third Covid-19 waves ▪ Wholesale market sha
Slide 32: Review of the Year
REVIEW OF THE YEAR ▪ Total managed turnover +20.6% to R28.4bn ▪ Two new bulk distribution clients in Q1 and Q2 FY2022 ▪ Generic medicines +17.3% (71% of volume) ▪ Proved service credentials, providing hospitals with life-saving drugs through the unrest ▪ Reached storage capacity in DCs – extending r
Slide 33: Strategy & Outlook
STRATEGY & OUTLOOK BERTINA ENGELBRECHT
Slide 34: Group Strategic Objectives
GROUP STRATEGIC OBJECTIVES CLICKS GROUP ANNUAL RESULTS 2021 34
Slide 35: Outlook for FY2022
OUTLOOK FOR FY2022 ▪ Continued impact of Covid-19 and civil unrest into FY2022 ▪ Committed to supporting the national vaccination programme ▪ Expect to sustain volume growth ▪ Integrating new IT systems ▪ Investing in digital engagement ▪ Consumer environment will remain extremely constrained ▪ Busi
Slide 36: Thank You
THANK YOU
Slide 37: 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