Clicks Group Limited · JSE:CLS
Clicks — H1 2019 Earnings Presentation
28 slides from Clicks's earnings presentation, April 2019
Slide 1: Interim Results for the Six Months Ended 28 February 2019
INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2019
Slide 2: Presentation Outline
PRESENTATION OUTLINE ▪ Review of the period ▪ Financial results ▪ Trading performance ▪ Outlook ▪ Questions CLICKS GROUP INTERIM RESULTS 2019 2
Slide 3: Review of the Period
REVIEW OF THE PERIOD VIKESH RAMSUNDER
Slide 4: Review of the Period
REVIEW OF THE PERIOD ▪ Good health & beauty sales performance ▪ Strong volume growth, with low inflation ▪ Market share gains ▪ Strong performance from UPD ▪ Benefiting from four new bulk distribution contracts ▪ Diluted headline earnings per share up 13.2% ▪ Further R1.5 billion value created via B
Slide 5: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Group turnover up 6.2% ▪ Health & beauty turnover up 8.5% ▪ UPD reported turnover up 5.1% ▪ Operating margin up from 6.5% to 6.8% ▪ Diluted HEPS up 13.2% to 300.1 cps ▪ Further 8.1m shares issued for BBBEE share scheme ▪ Return on equity of 35.2% ▪ Interim dividend of 118.0 cp
Slide 7: Turnover
TURNOVER % same R′m % % Feb 2019 Feb 2018 change stores inflation growth Retail 11 330 10 522 7.7 4.5 1.0 Health & beauty 8.5 Musica (11.0) Distribution 6 650 6 328 5.1 (0.2) Intragroup turnover (2 646) (2 417) 9.5 Total group 15 334 14 433 6.2 0.5 ▪ Strong volume growth in health & beauty brands ▪
Slide 8: Total Income
TOTAL INCOME Feb 2019 Feb 2018* % Feb 2019 Feb 2018* R′m R′m change % margin % margin Retail 3 813 3 525 8.2 33.7 33.5 Distribution 527 448 17.5 7.9 7.1 Intragroup (88) (68) Total group 4 252 3 905 8.9 27.7 27.1 ▪ Retail margin growth driven by: ▪ Shift to private label products ▪ Mix impact ▪ UPD b
Slide 9: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R′m Feb 2019 Feb 2018 % change Depreciation and amortisation 159 143 11.1 Occupancy costs 498 458 8.8 Employment costs 1 547 1 427 8.4 Other operating costs 745 707 5.4 Total retail costs 2 949 2 735 7.8 % of turnover 26.0% 26.0% ▪ Opened net 33 Clicks stores and 35 ph
Slide 10: Operating Expenditure - Distribution
OPERATING EXPENDITURE - DISTRIBUTION R′m Feb 2019 Feb 2018 % change Depreciation and amortisation 18 17 4.9 Occupancy costs 2 2 15.7 Employment costs 131 118 11.5 Other operating costs 181 159 13.8 Total distribution costs 332 296 12.4 ▪ Expenses impacted by new bulk distribution contracts CLICKS GR
Slide 11: Operating Profit
OPERATING PROFIT Feb 2019 Feb 2018* % Feb 2019 Feb 2018* R′m R′m change % margin % margin Retail 864 789 9.4 7.6 7.5 Distribution 194 153 27.2 2.9 2.4 Intragroup (14) (4) Total group 1 044 938 11.3 6.8 6.5 ▪ Both divisions leveraged margin despite low inflationary environment ▪ Musica remains profit
Slide 12: Inventory
INVENTORY Days in stock Inventory (R′m) Feb 2019 Feb 2018 Feb 2019 Feb 2018* % change Retail 79 81 3 264 3 100 5.3 Distribution 46 43 1 652 1 490 10.9 Intragroup inventory (81) (45) Total group 76 75 4 835 4 545 6.4 ▪ UPD impacted by stock buy-in over SEP increase period ▪ Group net working capital
Slide 13: Cash Generation
CASH GENERATION R′m Feb 2019 Feb 2018* Profit before tax 1 059 939 Non-cash adjustments 204 172 Operating profit before working capital changes 1 263 1 111 Working capital changes (413) (53) Net interest and tax paid (115) (168) Cash inflow from operations 735 890 * Restated for IFRS 9 and IFRS 15 C
Slide 14: Cash Utilisation
CASH UTILISATION R′m Feb 2019 Feb 2018 Cash inflow from operations 735 890 Capital expenditure (264) (269) Dividends paid (682) (559) Share buy-backs (4) - Other investing activities 10 (4) Other financing activities 134 128 Net cash (utilised)/generated (71) 186 Cash and cash equivalents at period
Slide 15: Capital Management
CAPITAL MANAGEMENT ▪ Group continues to be cash generative ▪ Multi-year investment programme for supply chain and IT ▪ Supporting organic growth through store openings/refurbishments ▪ R701m capex planned for FY2019 ▪ R364m on stores ▪ R337m on infrastructure, including: - Phase 2 expansion of Click
Slide 16: Trading Performance
TRADING PERFORMANCE VIKESH RAMSUNDER
Slide 17: Health & Beauty Sales Performance
HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 8.9 29.1 Front shop health 9.5 22.7 Beauty and personal care 6.7 31.5 General merchandise 10.0 16.7 Total turnover 8.5 100.0 ▪ Comparable stores turnover growth of 5.2% ▪ Inflation only 0.7% ▪ Volume growth of 4.5% CLICKS GROUP INTER
Slide 18: Market Share Gains
MARKET SHARE GAINS % Feb 2019 Feb 2018 Health Retail pharmacy* 23.8 23.0 Front shop health** 31.3 31.1 Baby** 15.7 14.4 Beauty and personal care Skincare** 36.1 36.4 Haircare** 28.3 27.7 Personal care** 17.2 16.6 General merchandise Small household appliances*** 14.4 14.8 * Per IQVIA (Private Retail
Slide 19: Review of the Period
REVIEW OF THE PERIOD ▪ Good volumes in pharmacy ▪ Generic sales +12.9% ▪ OTC sales +13.8% ▪ Promotional sales +10.3% ▪ 38.2% of turnover ▪ Private label and exclusive brands up from 22.1% to 22.9% of sales ▪ Front shop at 29.7% ▪ Pharmacy at 6.2% CLICKS GROUP INTERIM RESULTS 2019 19
Slide 20: Private Label Cosmetics
PRIVATE LABEL COSMETICS ▪ Sorbet Cosmetics (launched March 2018) ▪ 320 products ▪ Largest range of foundation shades in SA market ▪ Exclusive brands include NYX, Max Factor, Revolution, Wet n Wild, The Body Shop ▪ 18% of cosmetics sales are private label and exclusive brands ▪ Key differentiator CLI
Slide 21: Review of the Period (Continued)
REVIEW OF THE PERIOD (CONTINUED) ▪ 7.6 million active ClubCard members ▪ 77% of sales ▪ Digital platform performing well ▪ Enhancements to the ClubCard app ▪ Online is the fastest growing store ▪ Expanding Clicks store network ▪ 17 new stores Format Opened Total ▪ 18 new pharmacies Convenience 14 49
Slide 22: Clicks Group Interim Results 2018
CLICKS GROUP INTERIM RESULTS 2018 22
Slide 23: Fine Wholesale Turnover
FINE WHOLESALE TURNOVER Independent Other channels pharmacies (-12.1%) (+11.0%) 1.7% 15.4% 3.7% 14.3% Private Clicks 27.9% 55.0% 52.2% (+8.5%) hospitals 29.8% (-2.3%) ▪ Wholesale turnover up 5.2% ‒ Independent pharmacies benefited from new buying group and buy-ins ahead of SEP increase ‒ Hospitals i
Slide 24: Operational Update
OPERATIONAL UPDATE ▪ Total managed turnover +21.9% to R10.2bn ▪ Four new bulk distribution contracts since June 2018 ▪ SEP increase of 3.78% in Feb 2019 vs 1.26% in Mar 2018 ▪ Cape Town DC expansion completed ▪ Investment in IT platform and warehouse management systems ▪ Simplifying operations ▪ Ext
Slide 25: Outlook
OUTLOOK VIKESH RAMSUNDER
Slide 26: Outlook
OUTLOOK ▪ Consumer environment will remain very challenging ▪ Impact of electricity load shedding ▪ Selling price inflation to increase marginally in H2 ▪ Health & beauty markets and business model are resilient ▪ Clicks will open 41 stores this year ▪ UPD to benefit from additional two bulk distrib
Slide 27: Thank You
THANK YOU CLICKS GROUP INTERIM RESULTS 2019 27
Slide 28: 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