Clicks Group Limited · JSE:CLS
Clicks — FY2018 Earnings Presentation
31 slides from Clicks's earnings presentation, October 2018
Slide 1: Annual Results for the Year Ended 31 August 2018
ANNUAL RESULTS CLICKS GROUP FOR THE YEAR ENDED 31 AUGUST 2018 LIMITED
Slide 2: Presentation Outline
PRESENTATION OUTLINE ▪ Review of the year ▪ Financial results ▪ Trading performance ▪ Strategy & outlook ▪ Questions CLICKS GROUP ANNUAL RESULTS 2018 2
Slide 3: Review of the Year
REVIEW OF THE YEAR DAVID KNEALE
Slide 4: Review of the Year
REVIEW OF THE YEAR ▪ Increasingly challenging conditions in second half ▪ Consumers under further pressure ▪ Very low selling price inflation ▪ Lower incidence of colds & flu ▪ Clicks accelerated volume growth, opened 41 stores and increased market shares ▪ UPD maintained margin despite low SEP incr
Slide 5: Review of the Year (continued)
REVIEW OF THE YEAR (CONTINUED) ▪ Investment in people ▪ R1.3 billion paid out to beneficiaries of BBBEE share scheme ▪ Company-funded health insurance extended to all employees ▪ Recognised as Top Employer in retail sector* ▪ Another record year of ▪ Capital investment in stores, supply chain and IT
Slide 6: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING
Slide 7: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Group turnover up 9.1% ▪ Health & Beauty turnover up 11.7% ▪ UPD reported turnover up 8.4% ▪ Operating margin up from 6.8% to 7.0% ▪ Diluted HEPS up 15.1% to 578.0 cps ▪ Cash generated by operations R2.5 billion ▪ Total dividend of 380 cps, up 18.0% ▪ 62% dividend payout ratio
Slide 8: Sustained Financial Performance
SUSTAINED FINANCIAL PERFORMANCE 62% 60% 59% 59% 56% 56% 56% 578 10-year 502 50% 50% 50% CAGRs 439 384 380 Diluted HEPS: 337 322 298 16.0% 273 272 250 235 211 168 190 Dividend per 166 152 106 125 share: 20.1% 84 Total - 20% shareholder 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 return**: 32.5%
Slide 9: Turnover
TURNOVER % same R′m % % 2018 2017 change stores inflation growth Retail 21 063 19 015 10.8 5.5 1.4 Health & Beauty 11.7 Musica (8.4) Distribution 13 376 12 334 8.4 2.9 Intragroup turnover (5 199) (4 540) Total group 29 240 26 809 9.1 1.9 ▪ Good volume growth in health and beauty brands ▪ Strong H2 f
Slide 10: Total Income
TOTAL INCOME 2018 2017 % 2018 2017 R′m R′m change % margin % margin Retail 7 079 6 357 11.4 33.6 33.4 Distribution 982 910 7.9 7.3 7.4 Intragroup (167) (120) Total group 7 894 7 147 10.5 27.0 26.7 ▪ UPD impacted by low SEP increase (1.26% in Mar 2018 vs 7.5% in Mar 2017) ▪ Group benefiting from stro
Slide 11: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R′m 2018 2017 % change Depreciation and amortisation 285 252 13.0 Occupancy costs 926 793 16.8 Employment costs 2 853 2 622 8.8 Other operating costs 1 311 1 204 8.9 Total retail costs 5 375 4 871 10.3 % of turnover 25.5% 25.6% ▪ Comparable retail costs up 5.1% ▪ Depre
Slide 12: Operating Expenditure - Distribution
OPERATING EXPENDITURE - DISTRIBUTION R′m 2018 2017 % change Depreciation and amortisation 35 31 12.8 Occupancy costs 3 3 2.9 Employment costs 242 224 8.2 Other operating costs 339 323 4.8 Total distribution costs 619 581 6.5 ▪ Investment in onboarding new distribution clients in H2 CLICKS GROUP ANNU
Slide 13: Operating Profit
OPERATING PROFIT 2018 2017 % 2018 2017 R′m R′m change % margin % margin Retail 1 705 1 486 14.7 8.1 7.8 Distribution 362 329 10.2 2.7 2.7 Intragroup (25) (1) Total group 2 042 1 814 12.6 7.0 6.8 ▪ Musica profit R19m lower ▪ Both divisions benefiting from increased scale CLICKS GROUP ANNUAL RESULTS 2
Slide 14: Inventory
INVENTORY Days in stock Inventory (R′m) 2018 2017 2018 2017 % change Retail 71 69 2 927 2 531 15.6 Distribution 38 38 1 367 1 264 8.2 Intragroup inventory (67) (41) Total group 67 65 4 227 3 754 12.6 ▪ Net working capital days improved from 37 to 36 days CLICKS GROUP ANNUAL RESULTS 2018 14
Slide 15: Cash Management
CASH MANAGEMENT 182 16 2 274 (267) (671) R'm 101 823 (812) Operating Working Net finance Taxation Capex Dividends Other Net profit before capital income financing increase working movements and in cash capital investing activities CLICKS GROUP ANNUAL RESULTS 2018 15
Slide 16: Capital Expenditure
CAPITAL EXPENDITURE ▪ R700m capex planned for FY2019 ▪ R371m on stores, including: - 25 – 30 new Clicks stores - 30 – 35 new pharmacies - 60 store refurbishments ▪ R329m on infrastructure, including: - Clicks Centurion DC expansion (2nd phase) - R77m on UPD ▪ Capex of R650m – R700m p.a. over the nex
Slide 17: Medium-Term Financial Targets
MEDIUM-TERM FINANCIAL TARGETS Achieved Medium- in FY2018 term target ROE (%) 38.2 50 – 60 ROA (%) 13.9 14 – 18 Net working capital days 36 33 – 38 Group operating margin (%) 7.0 6.5 – 7.5 Retail 8.1 7.5 – 8.5 Distribution 2.7 2.5 – 3.0 Dividend payout ratio (%) 62 60 – 65 CLICKS GROUP ANNUAL RESULTS
Slide 18: Trading Performance
TRADING PERFORMANCE DAVID KNEALE
Slide 19: Health & Beauty Sales Performance
HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 13.2 30.8 Front shop health 14.1 23.3 Beauty and personal care 7.6 30.2 General merchandise 13.1 15.7 Total turnover 11.7 100.0 ▪ Comparable stores turnover +6.2% ▪ Inflation only 1.1% ▪ Volume growth of 5.1% CLICKS GROUP ANNUAL RESU
Slide 20: Market Share Gains
MARKET SHARE GAINS % Aug 2018 Aug 2017 Health Retail pharmacy* 23.3 22.1 Front shop health** 30.8 30.0 Baby** 15.1 13.7 Beauty Skincare** 36.1 36.0 Haircare** 28.2 26.7 General merchandise Small electrical appliances*** 17.9 17.4 * Per IQVIA (Private Retail Pharmacy S1-6) ** Per AC Nielsen (restated
Slide 21: Review of the Year
REVIEW OF THE YEAR ▪ Maintaining value Clicks price index* vs: Retailer A 99.8% ▪ Price competitive with Retailer B 94.8% all national retailers Retailer C 97.8% ▪ Promotional sales +14.7% Retailer D 91.8% to 35.0% of turnover * Excluding 3 for 2 promotions ▪ Differentiating our product offer ▪ Priv
Slide 22: Review of the Year (continued)
REVIEW OF THE YEAR (CONTINUED) ▪ Engaging customers ▪ 7.8m active ClubCard members, 77.2% of sales ▪ Clicks app downloaded by over 250 000 customers ▪ Improving customer care ▪ R102m invested in training ▪ Pharmacy staff turnover down to 15% ▪ Extending convenience ▪ 663 Clicks stores with 510 pharm
Slide 23: 50th Birthday Celebrations
50th BIRTHDAY CELEBRATIONS CLICKS GROUP ANNUAL RESULTS 2018 23
Slide 24: Clicks Group Annual Results 2017
CLICKS GROUP ANNUAL RESULTS 2017 24
Slide 25: Fine Wholesale Turnover
FINE WHOLESALE TURNOVER Independent Other channels pharmacies (-1.2%) (+1.4%) 1.9% 14.9% 3.7% 3.7% 14.3% 14.3% Private 28.7% 52.2% 54.5% Clicks hospitals 29.8% 52.2% (+13.1%) 29.8% (+4.1%) ▪ Wholesale turnover up 8.2% ▪ Wholesale market share up from 25.6% to 26.0%* * MAT per IQVIA CLICKS GROUP ANNU
Slide 26: Review of the Year
REVIEW OF THE YEAR ▪ Generic medicines +13.2% (69% of volume) ▪ Lower incidence of colds & flu ▪ Business managed efficiently ▪ Inventory management ▪ Labour productivity ▪ Transport optimisation ▪ Total managed turnover +8.9% to R17.9bn ▪ 23 distribution clients – 1 more started in October CLICKS G
Slide 27: Strategy & Outlook
STRATEGY & OUTLOOK VIKESH RAMSUNDER
Slide 28: Strategic Focus
STRATEGIC FOCUS ▪ Group strategy remains unchanged ▪ Retail focus will be on delivering: Goal of 900 Clicks stores in Convenience South Africa 25 - 30% share for private Differentiation label and exclusive brands Leveraging customer loyalty Personalisation through ClubCard ▪ Further capacity to grow
Slide 29: Outlook for FY2019
OUTLOOK FOR FY2019 ▪ Consumer environment will remain challenging ▪ Confident of sustaining volumes ▪ Selling price inflation to stay low at least for H1 ▪ 2019 SEP increase likely to be only slightly higher than 2018 ▪ Health & beauty markets and business model are resilient ▪ Strong leadership tea
Slide 30: Thank You
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Slide 31: 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