Clicks Group Limited · JSE:CLS
Clicks — H1 2020 Earnings Presentation
32 slides from Clicks's earnings presentation, Nov 21, 2020
Slide 1: Interim Results for the Six Months Ended 29 February 2020
INTERIM RESULTS FOR THE SIX MONTHS ENDED 29 FEBRUARY 2020
Slide 2: Presentation Outline
PRESENTATION OUTLINE ▪ Review of the period ▪ Financial results ▪ Trading performance ▪ Outlook ▪ Questions CLICKS GROUP INTERIM RESULTS 2020 2
Slide 3: Review of the Period
REVIEW OF THE PERIOD VIKESH RAMSUNDER CLICKS GROUP INTERIM RESULTS 2020 3
Slide 4: Review of the Period
REVIEW OF THE PERIOD ▪ Strong growth in health & beauty sales ▪ Good volume growth, despite increased load shedding and consumers being under pressure ▪ Black Friday changing customer behaviour ▪ Continued market share gains ▪ UPD gained share with new wholesale contracts ▪ Good working capital mana
Slide 5: Financial Results
FINANCIAL RESULTS MICHAEL FLEMING CLICKS GROUP INTERIM RESULTS 2020 5
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS ▪ Group turnover up 9.9% ▪ Health & Beauty turnover up 9.6% ▪ UPD reported turnover up 12.3% ▪ Operating margin maintained at 7.4% ▪ Diluted HEPS up 14.4% to 338.4 cps ▪ Return on equity at 34.8% ▪ Cash balance of R2.3bn at period end ▪ No interim dividend – will consider an ann
Slide 7: Turnover
TURNOVER % same R′m % % Feb 2020 Feb 2019 change stores inflation growth Retail 12 305 11 330 8.6 5.0 2.7 Health & Beauty 9.6 Musica (17.9) Distribution 7 467 6 650 12.3 2.4 Intragroup turnover (2 915) (2 646) 10.1 Total group 16 857 15 334 9.9 2.5 ▪ Strong volume growth in health & beauty brands ▪
Slide 8: Total Income
TOTAL INCOME Feb 2020 Feb 2019 % Feb 2020 Feb 2019 R′m R′m change % margin % margin Retail 4 107 3 813 7.7 33.4 33.7 Distribution 601 527 14.2 8.1 7.9 Intragroup (107) (88) Total group 4 601 4 252 8.2 27.3 27.7 ▪ Retail margin impacted by higher operating costs at Centurion DC ▪ UPD benefiting from
Slide 9: Operating Expenditure - Retail
OPERATING EXPENDITURE - RETAIL R′m Feb 2020 Feb 2019* % change Depreciation – PPE 182 159 14.3 Depreciation – ROU asset 343 310 10.9 Occupancy costs 98 94 3.4 Employment costs 1 637 1 547 5.8 Other operating costs 804 745 8.0 Total retail costs 3 064 2 855 7.3 % of turnover 24.9% 25.2% Finance costs
Slide 10: Operating Expenditure - Distribution
OPERATING EXPENDITURE - DISTRIBUTION R′m Feb 2020 Feb 2019* % change Depreciation – PPE 18 18 (4.5) Depreciation – ROU asset 1 - Occupancy costs 1 2 (2.0) Employment costs 140 131 6.9 Other operating costs 220 181 21.4 Total distribution costs 380 332 14.5 ▪ Impact of new wholesale contracts * Resta
Slide 11: Operating Profit
OPERATING PROFIT Feb 2020 Feb 2019* % Feb 2020 Feb 2019* R′m R′m change % margin % margin Retail 1 043 958 9.0 8.5 8.5 Distribution 221 194 13.5 3.0 2.9 Intragroup (18) (14) Total group 1 246 1 138 9.4 7.4 7.4 ▪ Both divisions did well to hold margin in a tough environment * Restated for IFRS 16 CLI
Slide 12: Inventory
INVENTORY Days in stock Inventory (R′m) Feb 2020 Feb 2019 Feb 2020 Feb 2019 % change Retail 82 79 3 664 3 264 12.3 Distribution 58 46 2 340 1 652 41.6 Intragroup inventory (99) (81) Total group 84 76 5 905 4 835 22.1 ▪ Stock levels increased ahead of SEP increase ▪ Net working capital days improved
Slide 13: Cash Generation
CASH GENERATION R′m Feb 2020 Feb 2019* Profit before tax 1 179 1 045 Non-cash adjustments 590 625 Operating profit before working capital changes 1 769 1 670 Working capital changes (391) (489) Net interest and tax paid (216) (116) Net settlement of derivative 71 133 Cash inflow from operations 1 23
Slide 14: Cash Utilisation
CASH UTILISATION R′m Feb 2020 Feb 2019* Cash inflow from operations 1 233 1 198 Capital expenditure (309) (264) Dividends paid (822) (682) Other investing & financing activities (32) 7 Repayment of lease liability (374) (330) Net cash utilised (304) (71) Cash and cash equivalents at period end 2 309
Slide 15: Capital Management
CAPITAL MANAGEMENT ▪ R653m shares bought back to date in H2 ▪ R389m capex planned for H2 2020 ▪ R151m on stores, including: - 21 new Clicks stores - 13 new pharmacies ▪ R198m on infrastructure, including: - R137m on retail systems and infrastructure - R61m on UPD IT and warehouse equipment CLICKS GR
Slide 16: Medium-Term Financial Targets
MEDIUM-TERM FINANCIAL TARGETS Restated for IFRS 16 Medium-term target ROE (%) 50 – 60 ROA (%) 11 – 15 Net working capital days 30 – 35 Group operating margin (%) 7.5 – 8.5 Retail 8.5 – 9.5 Distribution 2.5 – 3.0 Dividend payout ratio (%) 60 – 65 CLICKS GROUP INTERIM RESULTS 2020 16
Slide 17: Trading Performance
TRADING PERFORMANCE VIKESH RAMSUNDER CLICKS GROUP INTERIM RESULTS 2020 17
Slide 18: Health & Beauty Sales Performance
HEALTH & BEAUTY SALES PERFORMANCE % change % contribution Pharmacy 8.3 28.8 Front shop health 11.8 23.5 Beauty and personal care 9.1 31.3 General merchandise 9.7 16.4 Total turnover 9.6 100.0 ▪ Comparable stores turnover growth of 5.8% ▪ Inflation only 2.3% ▪ Volume growth of 3.5% CLICKS GROUP INTER
Slide 19: Market Share Gains
MARKET SHARE GAINS % Feb 2020 Feb 2019 Health Retail pharmacy* 24.6 24.1 Front shop health** 31.7 31.2 Baby** 18.1 16.5 Beauty Skincare** 39.1 36.5 Haircare** 30.1 28.8 Personal care** 19.8 19.0 General merchandise Small electrical appliances*** 17.2 14.5 * Per IQVIA (Private Retail Pharmacy S1-6) (
Slide 20: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Maintaining value ▪ Price competitive with Clicks price index* vs: all national retailers Retailer A 97.0% ▪ Promotional sales +15.0% Retailer B 94.0% to 40.3% of turnover Retailer C 95.3% Retailer D 98.8% ▪ In pharmacy, generics +9.7% to * Excluding 3 for 2 promotions 56%
Slide 21: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Engaging customers through personalisation ▪ 8.4m active ClubCard members, 78.2% of sales ▪ Clicks app downloaded by 754 000 customers ▪ Launched “pick your own promotion” ▪ New partners – Engen in H1, eBucks in H2 ▪ Enabling efficient healthcare access ▪ Repeat prescripti
Slide 22: Performance and Strategy
PERFORMANCE AND STRATEGY ▪ Extending convenience ▪ 721 Clicks stores with 572 pharmacies Format Total ▪ 50% of customers < 5 km of a pharmacy Convenience 530 ▪ 65 SA stores still to get a dispensary Destination 191 ▪ 33 Clicks stores refurbished Total 721 ▪ Online is the fastest growing store CLICKS
Slide 23: UPD - We Deliver Healthcare
UPD WE DELIVER HEALTHCARE a i z | _ oe sil Cy IN ill 7 =| — ai ae | eT >t Bb me i ee Le ee ii tiie ly ERA 4 : a ee a iON, |i |e Tifa} 6A |
Slide 24: Fine Wholesale Turnover
FINE WHOLESALE TURNOVER Independent pharmacies & other channels (+16.1%) 16.9% Private 51.3% Clicks hospitals 31.8% (+9.6%) (+34.0%) ▪ Wholesale turnover up 17.6% ▪ 2 new wholesale buying groups ▪ Wholesale market share up from 26.0% to 27.2%* * MAT per IQVIA CLICKS GROUP INTERIM RESULTS 2020 24
Slide 25: Performance and Outlook
PERFORMANCE AND OUTLOOK ▪ Total managed turnover +3.3% to R10.6bn ▪ Bulk distribution business impacted by delay in issuing of state tenders ▪ Generic medicines +18.1% (68.8% of volume) ▪ Benefit of higher SEP increase in 2020 ▪ Maximum of 4.53% vs 3.78% in 2019 ▪ Secured license for additional rent
Slide 26: Outlook
) OUTLOOK VIKESH RAMSUNDER
Slide 27: Response to Covid-19 Pandemic
RESPONSE TO COVID-19 PANDEMIC ▪ As a leading healthcare provider we recognise our broader societal role and humanitarian responsibility in protecting our communities ▪ Aligned with government’s conviction to flatten the curve ▪ WHO and NICD hygiene protocols maintained across all stores ▪ Safety and
Slide 28: Response to Covid-19 Pandemic (Continued)
RESPONSE TO COVID-19 PANDEMIC (CONTINUED) ▪ Flu vaccinations offered to store staff at no cost ▪ Bonuses to be paid to customer-facing staff ▪ Executive and non-executive directors donating one third of salaries and fees for three months to the Solidarity Fund ▪ Free clinic services for customers wi
Slide 29: Trading Update for Weeks to April 2020
TRADING UPDATE FOR 7 WEEKS TO 19 APRIL 2020 ▪ Unprecedented demand across health and hygiene categories after state of disaster declared in SA ▪ Dramatic slowdown in sales over lockdown period as customers had stocked up on essentials and stayed home ▪ Only essential products sold in Clicks during l
Slide 30: Outlook
OUTLOOK ▪ Trading environment will be incredibly tough in H2 ▪ Extent and duration of the pandemic remain unknown ▪ Load shedding is a further risk, particularly over winter ▪ 35% depreciation in the Rand since 2 January 2020 ▪ Store and pharmacy plans unchanged ▪ Strategy and business model are res
Slide 31: Thank You
THANK YOU
Slide 32: 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