Clicks Group Limited · JSE:CLS

Clicks — FY2013 Earnings Presentation

33 slides from Clicks's earnings presentation, October 2013

  1. Slide 1: Annual Results for the Year Ended 31 August 2013

    ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2013

  2. Slide 2: Presentation Outline

    PRESENTATION OUTLINE  Review of the year  Financial results  Trading performance  Outlook  Questions CLICKS GROUP ANNUAL RESULTS 2013 2

  3. Slide 3: Review of the Year

    REVIEW OF THE YEAR DAVID KNEALE

  4. Slide 4: Review of the Year

    REVIEW OF THE YEAR  Middle income consumers remain under pressure  Minimal real growth in private healthcare market  Health and beauty markets continue to be promotionally driven  Selling price inflation constrained  Better second half performance in Clicks  UPD total turnover managed up 43.9%

  5. Slide 5: Financial Results

    FINANCIAL RESULTS MICHAEL FLEMING

  6. Slide 6: Financial Highlights

    FINANCIAL HIGHLIGHTS  Group turnover up 13.6%  Clicks turnover up 8.6%  UPD turnover up 22.8%  Selling price inflation of 2.6%  Operating margin down from 6.6% to 6.3%  Diluted headline EPS up 9.2% to 298.6 cps  Cash generated by operations R1.4 billion  Total dividend of 168.0 cps, up 10.5%

  7. Slide 7: Turnover

    TURNOVER % same R’m % % 2013 2012 change store inflation growth Clicks 11 293 10 401 8.6 5.8 3.1 Musica 862 872 (1.0) 5.9 2.6 The Body Shop 137 123 11.3 6.3 2.2 Total retail 12 292 11 396 7.9 5.8 3.1 UPD 7 710 6 277 22.8 1.8 Intragroup turnover (2 459) (2 236) 10.0 Total group 17 543 15 437 13.6 2.6

  8. Slide 8: Total Income

    TOTAL INCOME 2013 2012 % 2013 2012 R’m R’m change % margin % margin Retail 4 097 3 764 8.9 33.3 33.0 Distribution 655 559 17.1 8.5 8.9 Intragroup (56) (47) Total group 4 696 4 276 9.8 26.8 27.7  Private label margin growth and well managed promotional activity in Clicks  UPD margin impacted by sup

  9. Slide 9: Operating Expenditure - Retail

    OPERATING EXPENDITURE - RETAIL R’m 2013 2012 % change Depreciation and amortisation 181 155 16.9 Occupancy costs 495 468 5.8 Employment costs 1 605 1 425 12.6 Other operating costs 910 863 5.5 Total retail costs 3 191 2 911 9.6  Continuing investment in stores and IT  Pharmacy professional costs u

  10. Slide 10: Operating Expenditure - Distribution

    OPERATING EXPENDITURE - DISTRIBUTION R’m 2013 2012 % change Depreciation and amortisation 19 17 16.3 Occupancy costs 7 5 36.2 Employment costs 185 157 17.7 Other operating costs 249 224 11.2 Total distribution costs 460 403 14.3  Additional variable bulk distribution costs  Temporary warehouse cos

  11. Slide 11: Operating Profit

    OPERATING PROFIT 2013 2012 % 2013 2012 R’m R’m change % margin % margin Retail 907 852 6.3 7.4 7.5 Distribution 195 157 24.2 2.5 2.5 Intragroup 2 2 Total group 1 104 1 011 9.1 6.3 6.6  Margins within target ranges, despite investment in pharmacy and UPD distribution  Group margin impacted by mix C

  12. Slide 12: Inventory

    INVENTORY Days in stock* Inventory (R’m) 2013 2012 2013 2012 % change Retail 68 69 1 613 1 522 6.0 Distribution 30 34 619 567 9.0 Intragroup inventory (7) (9) Total group 59 63 2 225 2 080 7.0  UPD inventory normalised with annualisation of preferred supply contract  Inventory growth contained bel

  13. Slide 13: Cash Generation

    CASH GENERATION R’m 2013 2012 Profit before tax 1 051 958 Non-cash adjustments 300 277 Operating profit before working capital changes 1 351 1 235 Working capital changes 26 (161) Net interest and tax paid (364) (310) Cash inflow from operations 1 013 764  32.6% increase in cash from operations CLI

  14. Slide 14: Cash Utilisation

    CASH UTILISATION R’m 2013 2012 Cash inflow from operations 1 013 764 Capital expenditure (310) (256) Dividends paid (394) (337) Share buy-backs (354) (12) Other investing activities 5 8 Other financing activities 130 (159) Net cash generated 90 8 CLICKS GROUP ANNUAL RESULTS 2013 14

  15. Slide 15: Capital Management

    CAPITAL MANAGEMENT  Group will remain cash generative  Investing in the business – R338m capex planned in FY2014  R182m stores  R88m IT systems  R38m UPD  R30m other  Return balance of cash to shareholders  Dividend cover 1.8 times  Continued share buy-backs CLICKS GROUP ANNUAL RESULTS 2013

  16. Slide 16: Medium-Term Financial Targets

    MEDIUM-TERM FINANCIAL TARGETS 2013 – 2015 Achieved 2014 – 2016 target in 2013 target ROE (%) 55 – 65 55.6 50 – 60 ROA (%) 14 – 18 14.8 14 – 18 Inventory days 55 – 60 59 55 – 60 Group operating margin (%) 6.0 – 7.0 6.3 6.0 – 7.0 Retail 7.0 – 8.0 7.4 7.0 – 8.0 UPD 2.2 – 2.7 2.5 2.2 – 2.7 CLICKS GROUP

  17. Slide 17: Trading Performance

    TRADING PERFORMANCE DAVID KNEALE

  18. Slide 18: Sales Performance

    SALES PERFORMANCE % change % contribution Pharmacy 10.8 25.9 Front shop health 15.9 21.7 Beauty and personal care 6.1 32.4 General merchandise 2.7 20.0 Total turnover 8.6 100.0  Improved performance in second half – up 10%  Promotional activity – increased from 23% to 26% of sales, with no margin

  19. Slide 19: Pharmacy

    PHARMACY  Continued switch to generics +16.1%  40.3% of sales  Trend to self-medication  OTC medicines +14.1%  223 000 Discovery MedSaver/ HealthyCare members  Total volume growth +10.8%  Pharmacy staff turnover down from 37% to 28%  Market share % 2013 2012 Retail pharmacy* 17.6 16.2 * Per

  20. Slide 20: Front Shop Health

    FRONT SHOP HEALTH  Good growth in key categories  Front shop medicines +12.1%  Vitamins and supplements +11.4%  Baby +27.6%  Broadening product ranges  Space increased by 9.6%  Market share % 2013 2012 Front shop health** 39.6 38.5 Baby** 9.9 8.4 ** Per AC Nielsen (restated) CLICKS GROUP ANNU

  21. Slide 21: Beauty and Personal Care

    BEAUTY AND PERSONAL CARE  Highly competitive markets  Promotions key to driving sales  Fragrance +13.0%  Colour cosmetics +6.5%  Skincare +6.4%  Slower growth in haircare +1.5%  Lack of product innovation in Caucasian haircare  Market share % 2013 2012 Skincare** 34.4 34.1 Haircare** 30.5 30

  22. Slide 22: General Merchandise

    GENERAL MERCHANDISE  Improvement in homeware +1.5%  Up 3.9% in second half  Ranges being refreshed  Good performance in convenience categories  Confectionery +9.6%  Domestics +16.4%  Electrical -1.2% impacted by warm winter and focus on margin  Market share % 2013 2012 Small household applia

  23. Slide 23: Customers and Stores

    CUSTOMERS AND STORES  ClubCard membership now 4.1m  76.1% of sales  225 000 members of Baby Club  Private label maintained at 18.4% of sales  Front shop at 24.1%  54 private label medicines on shelf  331 dispensaries in 442 stores at year end  25 new stores in FY2014  20 – 25 new pharmacies

  24. Slide 24: Musica

    MUSICA AWORLD AWAITS

  25. Slide 25: Performance

    PERFORMANCE Market share* % change % contribution 2013 2012 CDs (6.5) 44.3 46.2% 43.7% DVDs 2.6 27.3 29.5% 27.7% Gaming (14.7) 14.5 7.3% 9.8% Technology 38.5 13.9  Continued market share gains in CDs and DVDs  Reduced focus on lower margin gaming category  Good growth in technology  Net closure

  26. Slide 26: Performance

    PERFORMANCE  Higher income customers proving more resilient  Good sales performance  New skincare and make-up launches  Good gifting ranges  “Love Your Body” sales up 16.9%  Now 58% of sales  Capsules in 54 Clicks stores and 9 store-in-store concepts  4 new stores in FY2013, and a further 2

  27. Slide 27: UPD

  28. Slide 28: Turnover

    TURNOVER % change % contribution Clicks 9.8 32.0 Hospitals 14.1 25.9 Independent pharmacy (5.6) 18.1 Other channels 334.3 24.0 Total turnover 22.8 100.0  Volume growth of 23.5%  Generics +26.7% CLICKS GROUP ANNUAL RESULTS 2013 28

  29. Slide 29: Performance

    PERFORMANCE  UPD manages total turnover of R11.5 billion  154 million units  Significant player in the bulk distribution market  Portfolio of 20 distribution clients  R3.8bn notional turnover in FY2013  Margin pressure from growth in generics  Generics now 36.9% of wholesale medicines  Whole

  30. Slide 30: Outlook

    OUTLOOK DAVID KNEALE

  31. Slide 31: Outlook

    OUTLOOK  Muted consumer spending growth to continue  Selling price inflation expected to be 4% - 5%  Clicks  Leverage investment in pharmacy  Optimise the ClubCard programme  Increase private label penetration  Continue to expand store footprint  UPD  Leverage efficiencies from investment i

  32. Slide 32: Thank You

    THANK YOU

  33. Slide 33: 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

Clicks Group — FY2013 Earnings Presentation on 6ix