Clicks Group Limited · JSE:CLS
Clicks — FY2012 Earnings Presentation
39 slides from Clicks's earnings presentation, 2012
Slide 1: Annual Results for the Year Ended 31 August 2012
ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2012
Slide 2: Presentation Outline
PRESENTATION OUTLINE Review of the year Financial results Trading performance Outlook Questions CLICKS GROUP ANNUAL RESULTS 2012 2
Slide 3: Review of the Year
REVIEW OF THE YEAR DAVID KNEALE
Slide 4: Review of the Year
REVIEW OF THE YEAR Middle income consumers under pressure Health and beauty markets driven by promotions Minimal real growth in private healthcare market Low selling price inflation Diluted headline earnings per share up 9.5% CLICKS GROUP ANNUAL RESULTS 2012 4
Slide 5: Review of the Year continued
REVIEW OF THE YEAR continued Retail Margin under pressure in Clicks Costs contained but pharmacist retention impacted Market share gains in all key markets Continued benefit from customer loyalty Musica and The Body Shop both performed well UPD Tripled distribution agency contracts t
Slide 6: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING
Slide 7: Financial Highlights
FINANCIAL HIGHLIGHTS Group turnover up 9.2% Retail turnover up 8.2% UPD turnover up 11.1% Selling price inflation of 0.5% Operating margin maintained at 6.6% Diluted headline EPS up 9.5% to 273.4 cps Cash generated by operations R1.1 billion Total distribution of 152.0 cps, up 21.6%
Slide 8: Turnover
TURNOVER % same R’m % % 2012 2011 change store inflation growth Clicks 10 686 9 789 9.2 5.9 1.2 Musica 871 896 (2.7) 0.0 (4.9) The Body Shop 123 108 14.1 13.8 (1.9) Total retail 11 680 10 793 8.2 5.5 0.7 UPD 6 224 5 602 11.1 0.1 Intragroup turnover (2 467) (2 259) 9.2 Total group 15 437 14 136 9.2 0
Slide 9: Total Income
TOTAL INCOME 2012 2011 % 2012 2011 R’m R’m change % margin % margin Clicks 3 421 3 146 8.7 32.0 32.1 Musica 313 319 (2.1) 35.9 35.7 The Body Shop 80 75 7.5 65.3 69.3 Total retail 3 814 3 540 7.7 32.7 32.8 UPD 520 454 14.6 8.4 8.1 Intragroup (58) (48) Total group 4 276 3 946 8.4 27.7 27.9 Impact of
Slide 10: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R’m 2012 2011 % change Depreciation and amortisation 156 136 14.6 Occupancy costs 470 421 11.6 Employment costs 1 448 1 375 5.3 Other operating costs 885 805 10.0 Total retail costs 2 959 2 737 8.1 Comparable retail costs up 5.0% Depreciation and occupancy costs -
Slide 11: Operating Expenditure - UPD
OPERATING EXPENDITURE - UPD R’m 2012 2011 % change Depreciation and amortisation 15 14 14.2 Occupancy costs 3 3 15.9 Employment costs 135 121 11.1 Other operating costs 212 185 14.2 Total UPD costs 365 323 13.0 Comparable costs up 6.7% Additional variable distribution costs of R9.3m Other oper
Slide 12: Operating Profit
OPERATING PROFIT 2012 2011 % 2012 2011 R’m R’m change % margin % margin Clicks 788 751 4.9 7.4 7.7 Musica 42 31 36.3 4.9 3.5 The Body Shop 24 21 15.9 19.4 19.1 Total retail 854 803 6.4 7.3 7.4 UPD 155 131 18.5 2.5 2.3 Intragroup 2 4 Total group 1 011 938 7.9 6.6 6.6 CLICKS GROUP ANNUAL RESULTS 2012
Slide 13: Inventory
INVENTORY Days in stock* Inventory (R’m) 2012 2011 2012 2011 % change Clicks 66 63 1 394 1 203 15.9 Musica 74 83 116 136 (14.0) The Body Shop 144 125 18 12 48.0 Total retail 67 65 1 528 1 351 13.2 UPD 34 31 561 463 21.2 Intragroup inventory (9) (11) Total group 63 60 2 080 1 803 15.4 Clicks invest
Slide 14: Cash Generation
CASH GENERATION R’m 2012 2011 Profit before tax 958 898 Non-cash adjustments 277 177 Operating profit before working capital changes 1 235 1 075 Working capital changes, excl derivative (161) (266) Disposal of derivative hedge - 161 Net interest and tax paid (310) (293) Cash inflow from operations 7
Slide 15: Cash Utilisation
CASH UTILISATION R’m 2012 2011 Cash inflow from operations 764 677 Capital expenditure (256) (226) Distributions paid (337) (296) Share buy-backs (12) (552) Other investing activities 8 17 Other financing activities (159) 246 Net cash generated/(utilised) 8 (134) CLICKS GROUP ANNUAL RESULTS 2012 15
Slide 16: Capital Management
CAPITAL MANAGEMENT Group will remain cash generative Investing in the business – R356m capex planned in FY2013 R161m stores R85m IT systems R67m UPD R43m other Return balance of cash to shareholders Dividend cover 1.8 times Continued share buybacks CLICKS GROUP ANNUAL RESULTS 2012
Slide 17: Medium-Term Financial Targets
MEDIUM-TERM FINANCIAL TARGETS 2012 – 2014 Achieved 2013 – 2015 target in 2012 target ROE (%) 55 – 65 59.9 55 – 65 ROA (%) 14 – 18 15.3 14 – 18 Inventory days 55 – 60 63 55 – 60 Group operating margin (%) 6.0 – 7.0 6.6 6.0 – 7.0 Operating margin (%) Clicks 7.0 – 8.0 7.4 7.0 – 8.0 UPD 2.5 – 3.0 2.5 2.
Slide 18: Trading Performance
TRADING PERFORMANCE DAVID KNEALE
Slide 19: CLICKS GROUP ANNUAL RESULTS 2012
CLICKS GROUP ANNUAL RESULTS 2012 19
Slide 20: Sales Performance
SALES PERFORMANCE % change % contribution Health Scheduled medicines 8.4 27.3 Front shop health 15.1 28.7 Beauty 7.9 23.4 General merchandise 4.0 20.6 Total turnover 9.2 100.0 CLICKS GROUP ANNUAL RESULTS 2012 20
Slide 21: Health
HEALTH Dispensary sales +9.4% (value) and +9.9% (volume) Genericisation and more self-medication 109 000 Discovery MedSaver/HealthyCare members MedSaver basket 40% higher Good growth in other key categories Vitamins and supplements +9.9% Baby +37.0% Increased market share % 2012 2011
Slide 22: Beauty
BEAUTY Consistent performance Skincare +10.1% Colour cosmetics +8.9% Fragrance +8.6% Haircare +6.7% Stronger second half performance Strong promotions More innovation Increased market share % 2012 2011 Skincare** 33.8 33.4 Haircare** 30.4 29.5 ** Per AC Nielsen CLICKS GROUP ANNUAL
Slide 23: General Merchandise
GENERAL MERCHANDISE Impact of underperformance of homeware Up 1.3% in second half Ranges being refreshed Good performance in other key categories Confectionery +8.0% Electrical and hi-tech +9.0% Good market share growth % 2012 2011 Small household appliances*** 19.3 18.2 *** Per GfK (r
Slide 24: Stores
STORES 420 stores at August 2012 Slower growth in destination stores Impact of centre upgrades and economic climate Action plans New development programme for top 40 managers Improving depth of management Broadening product offer Investing in existing store base 20 revamps in FY201
Slide 25: Gateway Store
GATEWAY STORE CLICKS GROUP ANNUAL RESULTS 2012 25
Slide 26: Pharmacy
PHARMACY 306 dispensaries at August 2012 Costs contained too tightly Staff costs +7.5% Pharmacy staff turnover of 37% Action plans Greater management support for pharmacies Streamlined recruitment process Improved salaries for pharmacist assistants Extra 200 pharmacist assistants b
Slide 27: Customers and Brand
CUSTOMERS AND BRAND ClubCard membership now 3.9m Net growth of 300 000 members 77.1% of sales (2011: 76.7%) Basket value still double non-ClubCard 9 affinity partners 154 000 members of Baby Club Private label up from 18.2% to 18.4% of sales Front shop at 24.2% 39 private label med
Slide 28: Musica
MUSICA AWORLD AWAITS
Slide 29: Musica Performance
PERFORMANCE Market share* % change % contribution 2012 2011 CDs (5.1) 47 44% 41% DVDs (9.8) 26 28% 27% Gaming (3.4) 17 10% 9% Technology 31.6 10 Good second half performance Continued growth in market shares despite net closure of 14 stores Cost management will continue to improve efficiencies
Slide 30: The Body Shop Performance
PERFORMANCE Good sales performance Unit sales up 11.9% Good gifting range and better availability 158 000 “Love Your Body” cardholders 55% of sales Capsules in 44 Clicks stores and 5 store-in-store concepts 2 stores revamped with the new look 3 new stores planned in FY2013 CLICKS GRO
Slide 31: UPD
Slide 32: UPD Turnover
TURNOVER % change % contribution Clicks 9.2 39.3 Hospitals 11.2 28.2 Link pharmacy (7.6) 14.0 Other independent pharmacy 5.1 9.3 Other 101.3 9.2 Total turnover 11.1 100.0 CLICKS GROUP ANNUAL RESULTS 2012 32
Slide 33: UPD Performance
PERFORMANCE Market share increased from 23.1% to 24.3%* Scheduled medicines up 11.5% Originators +4.7% Generics +23.1%, driven by preferred supplier contract 0.1% inflation Front shop sales up 6.2% Product availability improved to 93% Successful take on of 10 distribution agency cont
Slide 34: Outlook
OUTLOOK DAVID KNEALE
Slide 35: Healthcare Regulations
HEALTHCARE REGULATIONS Dispensing fees No increase, but pushing for deregulation of Schedule 1 and 2 SEP increase Increase of up to 6% proposed for 2013 Logistics fees Support capping of the fee Still not at an appropriate level Definitions need to be clarified Administratively bur
Slide 36: Outlook
OUTLOOK Clicks Upweighting management depth and calibre in top stores Focus on improving pharmacy service Stronger product offer for Christmas Continue to invest in store revamps, new stores and new pharmacies 4 – 5% retail trading space growth UPD Drive wholesale turnover growth M
Slide 37: Outlook continued
OUTLOOK continued Muted consumer spending growth anticipated Health and beauty market will remain promotionally driven Selling price inflation in low single digits All our businesses are market leaders Demonstrated capability to gain market share Confident of achieving medium-term financ
Slide 38: Thank You
THANK YOU
Slide 39: 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