Clicks Group Limited · JSE:CLS
Clicks — FY2020 Earnings Presentation
35 slides from Clicks's earnings presentation, Nov 23, 2020
Slide 1: Annual Results for the Year Ended 31 August 2020
ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2020
Slide 2: Presentation Outline
PRESENTATION OUTLINE ▪ Review of the year ▪ Financial results ▪ Trading performance ▪ Strategy & outlook ▪ Questions CLICKS GROUP ANNUAL RESULTS 2020 2
Slide 3: Review of the Year
REVIEW OF THE YEAR VIKESH RAMSUNDER CLICKS GROUP ANNUAL RESULTS 2020 3
Slide 4: Review of the Year
REVIEW OF THE YEAR ▪ Strong and resilient performance in a global humanitarian crisis and deepening local economic recession ▪ Diluted headline earnings per share up 13.7% ▪ Declared dividend of 450 cents per share ▪ Impact of Covid-19 on trading ▪ Structural shift in shopping with boost to healthca
Slide 5: Review of the Year
REVIEW OF THE YEAR ▪ Focus on protecting staff and customers ▪ Thank our people for their dedication and commitment in a significantly disrupted and stressful working environment ▪ Cash preservation a priority throughout the crisis ▪ Took immediate measures to reduce cost base ▪ Deferred interim div
Slide 6: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING CLICKS GROUP ANNUAL RESULTS 2020 6
Slide 7: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Group turnover up 9.6% ▪ Health & Beauty turnover up 8.4% ▪ UPD reported turnover up 11.2% ▪ Operating margin up from 8.0% to 8.1% ▪ Diluted HEPS up 13.7% to 754.3 cps ▪ Cash balance of R2.2 billion at year end ▪ R1.5bn returned to shareholders ▪ Return on equity up from 37.0%
Slide 8: Turnover
TURNOVER % same R′m % % 2020 2019 change stores inflation growth Retail 24 785 23 105 7.3 3.4 2.2 Health & Beauty 8.4 Musica (30.2) Distribution 15 474 13 909 11.2 2.5 Intragroup turnover (5 895) (5 662) 4.1 Total group 34 364 31 352 9.6 2.4 ▪ Impact of lockdown on Musica, The Body Shop and Claire’s
Slide 9: Total Income
TOTAL INCOME 2020 2019 % 2020 2019 R′m R′m change % margin % margin Retail 8 248 7 692 7.2 33.3 33.3 Distribution 1 318 1 137 15.9 8.5 8.2 Intragroup (191) (178) Total group 9 375 8 651 8.4 27.3 27.6 ▪ Retail margin maintained ▪ UPD benefited from new contracts and higher SEP increase (4.53% in Febr
Slide 10: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R′m 2020 2019* % change Depreciation – PP&E 374 330 13.0 Depreciation – ROU asset 717 636 12.7 Occupancy costs 184 189 (2.8) Employment costs 3 208 3 072 4.4 Other operating costs 1 505 1 398 7.7 Total retail costs 5 988 5 625 6.5 % of turnover 24.2% 24.3% Finance cost
Slide 11: Operating Expenditure - Distribution
OPERATING EXPENDITURE - DISTRIBUTION R′m 2020 2019* % change Depreciation – PP&E 36 38 (4.7) Depreciation – ROU asset 4 - Occupancy costs 3 4 (21.1) Employment costs 289 270 7.0 Other operating costs 472 370 27.5 Total distribution costs 804 682 17.9 ▪ Impact of costs related to new wholesale and bu
Slide 12: Operating Profit
OPERATING PROFIT 2020 2019* % 2020 2019* R′m R′m change % margin % margin Retail 2 260 2 066 9.4 9.1 8.9 Distribution 513 454 13.0 3.3 3.3 Intragroup (6) (14) Total group 2 767 2 506 10.4 8.1 8.0 ▪ Well managed margin in Retail despite tough trading environment and Covid-19 impacts ▪ UPD maintained
Slide 13: Inventory
INVENTORY Days in stock Inventory (R′m) 2020 2019 2020 2019 % change Retail 71 72 3 435 3 255 5.5 Distribution 38 41 1 573 1 536 2.4 Intragroup inventory (87) (81) Total group 66 70 4 921 4 710 4.5 ▪ Stock levels well managed – clearance sale earlier than usual in Retail CLICKS GROUP ANNUAL RESULTS
Slide 14: Cash Management
CASH MANAGEMENT ▪ Accounts payable only settled after year end in 2019 ▪ R1.1 bn final dividend to be paid in January CLICKS GROUP ANNUAL RESULTS 2020 14
Slide 15: Capital Expenditure
CAPITAL EXPENDITURE ▪ R745m capex planned for FY2021, including R67m carried forward from FY2020 ▪ R317m on stores, including: - 25 – 30 new Clicks stores and 30 – 35 new pharmacies - 45 store refurbishments ▪ R428m on infrastructure, including: - R49m on UPD IT and warehouse equipment - R379m on re
Slide 16: Medium-Term Financial Targets
MEDIUM-TERM FINANCIAL TARGETS Achieved Medium-term in FY2020 target ROE (%) 37.8 40 – 50 ROIC (%) 25.1 20 – 30 ROA (%) 12.4 11 – 15 Net working capital days 37 30 – 35 Group operating margin (%) 8.1 7.5 – 8.5 Retail 9.1 8.5 – 9.5 Distribution 3.3 2.5 – 3.0 Dividend payout ratio (%) 60 60 – 65 CLICKS
Slide 17: Growth in Turnover, Profit and Margin
GROWTH IN TURNOVER, PROFIT AND MARGIN 8.0% 8.1% 7.0% 6.8% 34 364 4000 6.5% 31 352 32 000 29 239 3500 26 809 28 000 24 171 2 767 3000 24 000 2 507 2500 20 000 2 032 cents 1 814 2000 16 000 1 572 1500 12 000 8 000 1000 4 000 500 - 0 2016* 2017* 2018* 2019 2020 Turnover (R'm) Operating profit (R'm) Ope
Slide 18: Sustained Financial Performance
SUSTAINED FINANCIAL PERFORMANCE 10-year 62% 65% CAGRs 59% 59% 60% 60% 56% 56% 56% 754 50% 50% Diluted HEPS: 664 575 13.6% 502 445 450 cents 439 384 380 Dividend per 337 322 250 273 298 272 share: 15.5% 235 168 190 152 125 Total 0% shareholder 2011* 2012* 2013* 2014* 2015* 2016* 2017* 2018* 2019 2020
Slide 19: Creating Shareholder Value
CREATING SHAREHOLDER VALUE 10-year CAGRs Clicks Group share price 19.9% Food & Drug Retailers Index 6.5% Clicks Group share price Food & Drug Retailers Index CLICKS GROUP ANNUAL RESULTS 2020 19
Slide 20: Trading Performance
TRADING PERFORMANCE VIKESH RAMSUNDER CLICKS GROUP ANNUAL RESULTS 2020 20
Slide 21: Health & Beauty Sales Performance
HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 3.2 29.0 Front shop health 19.7 26.0 Beauty and personal care 4.7 29.0 General merchandise 8.8 16.0 Total turnover 8.4 100.0 ▪ Comparable stores turnover growth of 4.1% ▪ Inflation 2.0% ▪ Volume growth of 2.1% CLICKS GROUP ANNUAL RES
Slide 22: Market Shares
MARKET SHARES % Aug 2020 Aug 2019 Health Retail pharmacy* 23.8 24.1 Front shop health** 32.2 31.4 Baby** 19.7 17.0 Beauty Skincare** 39.2 37.6 Haircare** 30.3 29.6 Personal care** 18.2 18.0 General merchandise Small electrical appliances*** 19.2 16.4 * Per IQVIA (Private Retail Pharmacy S1-6) (resta
Slide 23: Performance and Strategy: Maintaining Value
PERFORMANCE AND STRATEGY ▪ Maintaining value Clicks price index* vs: ▪ Price competitive with Retailer A 98.4% all national retailers Retailer B 95.6% ▪ Promotional sales +14.7% Retailer C 95.6% to 40.2% of turnover Retailer D 100.0% ▪ R504 million cashback paid to * Excluding 3 for 2 promotions Clu
Slide 24: Performance and Strategy: Differentiating Our Product Offer
PERFORMANCE AND STRATEGY ▪ Differentiating our product offer ▪ Expanding higher tier Clicks Expert private label range to more categories ▪ Private label up from 22% to 23% of sales (front shop 29.2%, pharmacy 8.6%) ▪ GNC sales +18.9% ▪ The Body Shop sales in Clicks +9.7% despite restrictions, but s
Slide 25: Performance and Strategy: Engaging Customers
PERFORMANCE AND STRATEGY ▪ Engaging customers through personalisation ▪ 8.6m active ClubCard members, 78.2% of sales ▪ Voted best loyalty programme¹ ▪ Coolest health and beauty brand² ▪ New partnerships with Engen and eBucks ▪ Clicks app downloaded by 1.1m customers ▪ Launched myClubCard personalise
Slide 26: Performance and Strategy: Extending Convenience
PERFORMANCE AND STRATEGY ▪ Extending convenience Format Total ▪ 743 Clicks stores with 585 pharmacies* Convenience 549 ▪ 50% of population < 6km of a pharmacy Destination 194 ▪ Online sales grew 191%, but still only Total 743 1% of front shop sales ▪ Lower frequency of visits offset by 10.8% higher
Slide 27: UPD - We Deliver Healthcare
“UPD WE DELIVER HEALTHCARE
Slide 28: Fine Wholesale Turnover
FINE WHOLESALE TURNOVER Independent pharmacies & other channels (+16.1%) 17.3% 49.0% Private Clicks hospitals 33.7% (+3.8%) (+44.4%) ▪ Wholesale turnover up 17.0% ▪ Two new wholesale buying groups ▪ Independent pharmacies benefited from lockdown shopping trends ▪ Wholesale market share up from 27.0%
Slide 29: Review of the Year
REVIEW OF THE YEAR ▪ Total managed turnover +11.7% to R23.6bn ▪ Two new bulk distribution clients ▪ Generic medicines +16.3% (70% of volume) ▪ Impact of lack of cold and flu season and restriction in elective procedures at hospitals ▪ Strong growth in front shop products due to Covid-19 ▪ Sold Kalah
Slide 30: Commitment to ESG & Transformation
COMMITMENT TO ESG & TRANSFORMATION ▪ Included in FTSE4Good Index for last four years ▪ Founding signatory of the SA Plastics Pact ▪ Workforce comprises 93% black and 64% female employees ▪ 56% black and 33% female representation on the board ▪ R140 million invested in employee training and developme
Slide 31: Strategy & Outlook
STRATEGY & OUTLOOK VIKESH RAMSUNDER
Slide 32: Group Strategy
GROUP STRATEGY ▪ Retail focus is 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 2020 32
Slide 33: Outlook for FY2021
OUTLOOK FOR FY2021 ▪ Continued impact of Covid-19 into FY2021 ▪ Protest action in 2nd week of September ▪ Proven ability to adapt to changing market dynamics ▪ Consumer environment will remain extremely constrained ▪ Expect to sustain volume growth ▪ Strategy and business model continue to be resili
Slide 34: Thank You
THANK YOU
Slide 35: 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