Clicks Group Limited · JSE:CLS

Clicks — FY2016 Earnings Presentation

33 slides from Clicks's earnings presentation, October 2016

  1. Slide 1: Annual Results for the Year Ended 31 August 2016

    ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2016

  2. Slide 2: Presentation Outline

    PRESENTATION OUTLINE  Review of the year  Financial results  Trading performance  Outlook  Questions CLICKS GROUP ANNUAL RESULTS 2016 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  Another strong retail trading performance  Real volume growth in Clicks  Strengthened competitive position  Continued market share gains  UPD maintained its margin in a challenging year  Record year of capital investment  R876m returned to investors  Diluted headline earn

  5. Slide 5: Financial Results

    FINANCIAL RESULTS MICHAEL FLEMING

  6. Slide 6: Financial Highlights

    FINANCIAL HIGHLIGHTS  Group turnover up 9.5%  Health & beauty retail turnover up 13.5%  UPD turnover up 6.1%  Operating margin up from 6.3% to 6.5%  Diluted HEPS up 14.2% to 438.5 cps  Cash generated by operations R1.8 billion  Total dividend of 272.0 cps, up 15.7%  Total shareholder return

  7. Slide 7: Sustained Financial Performance

    SUSTAINED FINANCIAL PERFORMANCE 59% 59% 56% 56% 56% 438.5 50% 50% 50% 383.9 45% 46% 336.8 298.3 273.4 272 249.7 235 211.4 190 165.9 168 152 131.5 125 103.0 106 84 48 61 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Dividend per share (cents) Diluted HEPS (cents) Dividend payout ratio*  10-year

  8. Slide 8: Turnover

    TURNOVER % same R′m % % 2016 2015 change store inflation growth Retail 16 640 14 758 12.8 9.8 4.3 Distribution 11 055 10 415 6.1 5.4 Intragroup turnover (3 524) (3 103) 13.6 Total group 24 171 22 070 9.5 4.9  Volume growth in health and beauty brands  Retail inflation within guided range of 4 - 5%

  9. Slide 9: Total Income

    TOTAL INCOME 2016 2015 % 2016 2015 R′m R′m change % margin % margin Retail 5 604 5 018 11.7 33.7 34.0 Distribution 867 809 7.2 7.8 7.8 Intragroup (103) (92) 12.5 Total group 6 368 5 735 11.0 26.3 26.0  Investment in every day competitive pricing  Favourable mix impact on the group CLICKS GROUP ANN

  10. Slide 10: Operating Expenditure - Retail

    OPERATING EXPENDITURE - RETAIL R′m 2016 2015 % change Depreciation and amortisation 223 210 6.1 Occupancy costs 680 617 10.2 Employment costs 2 319 2 033 14.1 Other operating costs 1 076 1 007 6.9 Total retail costs 4 298 3 867 11.2 % of turnover 25.8% 26.2%  Investing in new stores, pharmacies and

  11. Slide 11: Operating Expenditure - Distribution

    OPERATING EXPENDITURE - DISTRIBUTION R′m 2016 2015 % change Depreciation and amortisation 29 27 7.6 Occupancy costs 4 3 22.8 Employment costs 232 222 4.1 Other operating costs 326 298 9.7 Total distribution costs 591 550 7.4  Excellent cost control in a difficult market CLICKS GROUP ANNUAL RESULTS

  12. Slide 12: Operating Profit

    OPERATING PROFIT 2016 2015 % 2016 2015 R′m R′m change % margin % margin Retail 1 306 1 151 13.5 7.8 7.8 Distribution 276 258 6.7 2.5 2.5 Intragroup (10) (13) Total group 1 572 1 396 12.6 6.5 6.3  Retail accounts for 83% of group profit  Margins held despite challenging market conditions  Group ma

  13. Slide 13: Inventory

    INVENTORY Days in stock Inventory (R′m) 2016 2015 2016 2015 % change Retail 72 71 2 338 2 024 15.5 Distribution 40 45 1 181 1 256 (6.0) Intragroup inventory (40) (30) Total group 66 68 3 479 3 250 7.0  Focused on maximising availability in Clicks  Investment in private label products and franchise

  14. Slide 14: Cash Management

    CASH MANAGEMENT 1 847 (19) (39) (444) R'm (433) (586) (290) (67) Operating Working Net finance Taxation Capex Dividends Share buy- Other profit before capital costs backs financing working movements and capital investing activities CLICKS GROUP ANNUAL RESULTS 2016 14

  15. Slide 15: Capital Management

    CAPITAL MANAGEMENT  Group will remain cash generative  R577m capex planned for FY2017  R343m on store refurbishments, new stores and pharmacies  R187m retail infrastructure  R47m UPD  Continue to return surplus cash to shareholders CLICKS GROUP ANNUAL RESULTS 2016 15

  16. Slide 16: Medium-Term Financial Targets

    MEDIUM-TERM FINANCIAL TARGETS Achieved 2017 – 2019 in 2016 target ROE (%) 49.2 50 – 60 ROA (%) 13.8 14 – 18 Inventory days 66 60 – 65 Group operating margin (%) 6.5 6.0 – 7.0 Retail 7.8 7.5 – 8.5 Distribution 2.5 2.0 – 2.5 CLICKS GROUP ANNUAL RESULTS 2016 16

  17. Slide 17: Trading Performance

    TRADING PERFORMANCE DAVID KNEALE

  18. Slide 18: Health & Beauty Sales Performance

    HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 14.2 27.3 Front shop health 14.9 23.1 Beauty and personal care 13.3 33.1 General merchandise 10.8 16.5 Total turnover 13.5 100.0  Health and beauty comprises Clicks, The Body Shop, GNC and Claire’s  Excellent growth across all cate

  19. Slide 19: Pharmacy and Front Shop Health

    PHARMACY AND FRONT SHOP HEALTH  Pharmacy  Continued switch to generics +18.6%  OTC medicines +18.1%  Front shop health  Good performance in all categories (medicines +13.1%, supplements +10.6%, first aid & diagnostics +15.4%)  Good growth in GNC; product offer limited by CAMS regulations  Con

  20. Slide 20: Beauty and General Merchandise

    BEAUTY AND GENERAL MERCHANDISE  Beauty and personal care  Benefit of wider range in fragrance +16.5%  Skincare +18.1%, driven by premium skincare  Haircare +7.5%  The Body Shop +14.2%  Claire’s in 123 stores  General merchandise  Confectionery +10.9%; electrical +12.0%  Market shares % Aug

  21. Slide 21: Customer Engagement

    CUSTOMER ENGAGEMENT  Over 1 million new ClubCard members in the past year  6.2 million active members  77% of sales  Private label up to 22.2% from 21.2% of sales  Front shop at 28.2%  Pharmacy at 4.8%  Online sales platform launched  Click & Collect now in all 485 stores in SA CLICKS GROUP

  22. Slide 22: Stores and Service

    STORES AND SERVICE  511 Clicks stores with 400 pharmacies  25 net new stores, 39 net new pharmacies  45 stores refurbished  26 stores outside SA, with sales up 25%  Investment in service  966 beauty advisors  540 healthcare and GNC advisors  2 535 pharmacy and clinic staff  111 trainees in

  23. Slide 23: Outlook

    OUTLOOK  Strategy remains unchanged  Maintain price competitiveness  Faster growth from private label and exclusive brands  Improved customer service  Growing ClubCard membership  Extending convenience with more stores and pharmacies  20 – 25 new stores  30 – 35 new pharmacies CLICKS GROUP A

  24. Slide 24: Clicks Group Annual Results 2016

    CLICKS GROUP ANNUAL RESULTS 2016 24

  25. Slide 25: Musica Performance

    PERFORMANCE Turnover Market share* % change % contribution Aug 2016 Aug 2015 CDs (2.6) 38.4 69.2% 60.9% DVDs (1.6) 25.6 52.3% 43.7% Gaming 4.8 17.6 15.0% 13.0% Technology 11.2 18.4 Total turnover 1.2 100.0  Market share growth in all categories, supported by good availability and strong promotional

  26. Slide 26: Clicks Group Annual Results 2016

    CLICKS GROUP ANNUAL RESULTS 2016 26

  27. Slide 27: Fine Wholesale Turnover

    FINE WHOLESALE TURNOVER % change % contribution Clicks 13.5 44.9 Hospitals 4.2 31.8 Independent pharmacy (9.4) 16.4 Other channels (6.4) 6.9 Fine wholesale turnover 4.6 100.0  Core customers 76.7% of sales  Wholesale market share 24.1%* * MAT per IMS CLICKS GROUP ANNUAL RESULTS 2016 27

  28. Slide 28: UPD Performance

    PERFORMANCE  Managing R15 billion in turnover – flat on last year  No new distribution business during the year  Continued margin pressure from product mix  Generics increased from 45.7% to 48.2% of reported turnover  Demonstrated ability to manage business efficiently in a difficult year  Bet

  29. Slide 29: UPD Outlook

    OUTLOOK  Continued margin pressure from faster growth in generics  Independent pharmacy customers under pressure  Slightly higher SEP increase expected  Opportunity for growth in distribution  Continued focus on cost efficiencies CLICKS GROUP ANNUAL RESULTS 2016 29

  30. Slide 30: Outlook

    OUTLOOK DAVID KNEALE

  31. Slide 31: Outlook

    OUTLOOK  Consumer environment to remain challenging  Higher selling price inflation may impact on volumes  Markets and business model are resilient  Continuing organic growth prospects for Clicks into the longer term  Investment in stores, IT, supply chain and people to enable growth  Confiden

  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 — FY2016 Earnings Presentation on 6ix