Wrap Text
Unaudited Interim Group Results for the six months ended 29 February 2024 and Cash Dividend Declaration
Clicks Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1996/000645/06
JSE share code: CLS
ISIN: ZAE000134854
CUSIP: 18682W205
LEI: 378900E967958A677472
("Clicks Group", "the group" or "the company")
UNAUDITED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 29 FEBRUARY 2024
AND CASH DIVIDEND DECLARATION
SHORT-FORM ANNOUNCEMENT
KEY FEATURES
- Group turnover up 9.0%
- Retail turnover up 12.4%
- Operating margin up 30 bps to 8.5%
- Diluted headline earnings per share up 13.0%
- Interim dividend up 13.5% to 210 cps
- R2.0 billion cash returned to shareholders
- Return on equity up to 43.4%
Overview
Clicks Group again showed its resilience in overcoming mounting headwinds
in the trading environment and gained market share across the retail
health and beauty categories, grew private label products, strengthened
margins, generated robust cash flows and improved returns to
shareholders. This translated into an increase of 13.0% in the group's
diluted headline earnings per share (HEPS) for the half year.
Clicks produced strong turnover and profit growth, driven primarily by
the higher demand in the beauty and personal care categories. Growth was
supported by the Clicks ClubCard loyalty programme which has grown to
11 million active members, gaining 1 million new members in the past
year.
Clicks opened its 900th store in February as the brand expanded its
retail footprint to 902 stores with the opening of a net 41 new stores in
the past year. A further 27 pharmacies were opened, extending the
national pharmacy presence to 718.
The acquisitions of Sorbet, M-Kem and software development company
180 Degrees, which were completed in the previous financial year, have
been successfully integrated into the group's operations and are
performing ahead of pre-acquisition expectations.
UPD is now positioned for growth following the completion of the large-
scale systems implementation early in the reporting period and to benefit
from the higher increase in the regulated single exit price (SEP) of
medicines relative to the prior year. UPD's stated strategy of
rationalising its bulk distribution portfolio to focus on profitable
clients has adversely impacted turnover through the non-renewal of two
contracts. The strategy is, however, expected to benefit margin and
support the acquisition of profitable new clients.
The group returned R2.0 billion to shareholders in dividend payments and
share buybacks in the six months. Since 2006, the group has returned
R19.1 billion to shareholders in dividends (R12.1 billion) and buybacks
(R7.0 billion).
Financial performance
Group turnover increased by 9.0% to R21.8 billion. Retail turnover, which
includes Clicks, GNC, The Body Shop and Sorbet corporate stores,
increased by 12.4%. Distribution turnover growth of 1.3% was impacted by
the systems implementation at the main UPD distribution centre.
Total income grew by 14.1% to R6.6 billion. The retail margin expanded by
60 basis points due to the strong growth in higher margin private label
products, the good performance of the beauty category and Sorbet
franchise fees. The distribution margin increased by 80 basis points as
UPD benefited from the higher SEP increase. The group's total income
margin expanded by 130 basis points to 30.2% as a result of the stronger
growth of retail relative to distribution.
Retail costs grew by 14.8% mainly due to higher depreciation charges,
lease liabilities, provisions for employee incentives, advertising and
electricity costs. The three acquisitions completed in the prior
financial year added 3.0% to cost growth. Comparable retail costs grew by
8.7%. Distribution costs increased by 10.8% due to higher depreciation
charges relating to the investment in systems as well as increased
employment costs to maintain service levels during the systems
implementation.
Group operating profit increased by 13.5% to R1.9 billion while the
group's operating margin increased by 30 basis points to 8.5%.
Headline earnings grew by 10.5% to R1.3 billion. Earnings per share
increased by 12.9% to 533 cents with HEPS and diluted HEPS increasing by
13.0% to 534 cents, benefiting from share buybacks in the last 12 months.
Working capital was well managed, with the group's net working capital
days improving from 47 to 44 days. Retail inventory days reduced to
82 days (H1 2023: 85) while UPD increased stock levels ahead of the SEP
increase which contributed to inventory days moving from 48 to 61 days.
Cash generated from operating activities before dividends paid totalled
R1.1 billion. Capital expenditure of R314 million was reinvested mainly
in new stores and pharmacies, store refurbishments, supply chain and
information technology. The group has invested R36 million in renewable
energy solutions, including the recent installation of additional solar
panels and battery storage at the head office and UPD's main distribution
centre. At end February 2024, the group held cash resources of
R853 million.
Outlook
Consumer spending will remain constrained owing to inflationary cost
pressures while potential disruption ahead of the general election in May
and the resumption of load shedding pose risks to the trading
environment.
Clicks plans to accelerate its store expansion programme by opening
50 - 55 stores for the 2024 financial year and remains committed to its
longer-term target of 1 200 stores. A further 10 - 20 pharmacies are
planned to be opened.
UPD is expected to deliver a stronger second half as the wholesaler
continues to improve performance following the recent systems
implementation and benefits further from the higher SEP increase.
Capital investment of R920 million is planned for the full financial
year. This includes R514 million for new stores and pharmacies, and store
refurbishments. A further R406 million will be invested in supply chain,
technology and infrastructure, including the ongoing investment in
renewable energy solutions.
Full-year earnings forecast
The directors forecast that the group's diluted HEPS for the financial
year ending 31 August 2024 will increase by between 10% and 15% over the
2023 financial year.
This forecast is based on the assumptions that the trading environment
will remain constrained in the second half of the 2024 financial year,
with continued high levels of consumer inflation, uncertainty ahead of
the general election in May, ongoing electricity load shedding and no
changes in the regulatory environment.
Shareholders are advised that this forecast is the responsibility of the
board of directors and has not been reviewed or reported on by the
group's independent auditor.
Interim dividend
The board of directors has approved an interim gross ordinary dividend
for the period ended 29 February 2024 of 210.0 cents per share
(2023: 185.0 cents per share). The source of the dividend will be from
distributable reserves and paid in cash.
Additional information
Dividends Tax (DT) of 20% amounting to 42.0 cents per ordinary share will
be withheld in terms of the Income Tax Act. Ordinary shareholders who
are not exempt from DT will therefore receive a dividend of 168.0 cents
per ordinary share net of DT.
The company has 238 062 465 ordinary shares and its income tax reference
number is 9061/745/71/8.
Shareholders are advised of the following salient dates in respect of the
interim dividend:
Last day to trade "cum" the dividend Tuesday, 25 June 2024
Shares trade "ex" the dividend Wednesday, 26 June 2024
Record date Friday, 28 June 2024
Payment to shareholders Monday, 1 July 2024
Share certificates may not be dematerialised or rematerialised between
Wednesday, 26 June 2024 and Friday, 28 June 2024, both days inclusive.
David Nurek Bertina Engelbrecht Gordon Traill
Chairman Chief executive officer Chief financial officer
Cape Town
25 April 2024
This short-form announcement is the responsibility of the Clicks Group
board of directors and is a summary of the information in the detailed
interim results announcement and does not contain full or complete
details.
The full announcement can be downloaded from
https://senspdf.jse.co.za/documents/2024/jse/isse/CLS/H12024.pdf
or on the group's website at www.clicksgroup.co.za. The announcement is
available for inspection, at no charge, at Clicks Group's registered
office during business hours for a period of 30 calendar days following
the date of this announcement. Any investment decision in relation to
Clicks Group's shares should be based on the full announcement.
Directors: DM Nurek* (Chairman), BD Engelbrecht (Chief Executive
Officer), RJD Inskip*, NNA Matyumza*, MJN Njeke*, SS Ntsaluba*, PM Osiris
(née Moumakwa)*, KC Ramon*, GD Traill† (Chief Financial Officer)
* Independent non-executive
† British
Registered office: Cnr Searle and Pontac Streets, Cape Town 8001
Transfer secretaries: Computershare Investor Services Proprietary Limited
www.clicksgroup.co.za
Sponsor
Investec Bank Limited
Date: 25-04-2024 08:00:00
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