Clicks Group: Resilience Sparks 12.2% Retail Growth Amidst Turbulent Times

  • Clicks Group's 2023 annual results show an 8.2% growth in turnover, with a 12.2% increase in retail turnover.
  • Strategic acquisitions and loyalty programs contributed to strong performance, despite challenges from civil unrest.
  • Clicks Group maintains resilience and commits to future growth, planning to open new stores and invest in expansion.

Clicks Group, the well-known South African health and beauty retailer, has reported its annual results for the year ended August 31, 2023. The company showcased remarkable resilience and continued growth despite challenging market conditions, demonstrating its ability to adapt to changing dynamics.

Here are the key highlights from Clicks Group’s 2023 annual results:

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A Year of Triumph Despite Adversity

In a year marked by economic uncertainty and evolving consumer preferences, Clicks Group managed to thrive, achieving significant milestones and maintaining robust financial health. The company’s performance was characterized by:

Strong Financial Performance

  • Group Turnover: Clicks Group recorded an 8.2% increase in group turnover, excluding vaccinations. When considering vaccinations, group turnover showed a 5.1% increase, with retail turnover up by an impressive 12.2%.
  • Adjusted Operating Margin: The company improved its adjusted operating margin by 30 basis points, reaching 8.7%. This growth reflected the efficient management of resources and strategic business decisions.
  • Dividends: Shareholders of Clicks Group were pleased to see a 6.6% increase in the total dividend, which amounted to 679 cents per share.
  • Cash Generation: The company generated a substantial R5.9 billion in cash from its operations, showcasing financial strength and liquidity.

Key Acquisitions

One of the most noteworthy achievements was the successful conclusion of three strategic acquisitions totaling R320 million, which strengthened Clicks Group’s leadership position in the health and beauty retail sector. These acquisitions included:

  1. Sorbet Beauty Salon Franchise: A chain of 194 outlets of the popular Sorbet beauty salon franchise was acquired, offering a new dimension to Clicks Group’s beauty offerings.
  2. M-Kem Pharmacy: Clicks Group acquired M-Kem, a well-established 24-hour pharmacy in the Western Cape, expanding its presence and services in the region.
  3. 180 Degrees: The acquisition of 180 Degrees, a pharmacy software development company, is expected to enhance the company’s operational efficiency and customer service.

Record Capital Expenditure

In its pursuit of long-term growth, Clicks Group allocated a record R930 million for capital expenditure. This investment was primarily directed towards expanding the store network and integrated supply chain. Notably, Clicks opened its 850th store and 700th pharmacy during the year.

Resilience Amidst Civil Unrest

The impact of the 2021 KwaZulu-Natal civil unrest was factored into the financial reporting. Adjustments were made for insurance recoveries related to the unrest to present a normalized view of Clicks Group’s underlying operating performance.

The Story of Clicks Group’s Success

Clicks Group’s achievements in 2023 were the result of dedicated efforts, strategic decisions, and the company’s commitment to delivering value to its customers and shareholders. Here’s a closer look at the key factors that contributed to this success:

Growing Market Share

In an environment characterized by growing pressure on consumer disposable income, Clicks Group managed to deliver stronger second-half turnover growth. The company also recorded market share gains in all core product categories, demonstrating its ability to adapt to evolving market dynamics.

The Clicks ClubCard Loyalty Program

One of the driving forces behind the company’s strong growth in private label sales and the sustained recovery in the beauty category was the Clicks ClubCard loyalty program. With 10.4 million active members, this program played a pivotal role in attracting and retaining customers.

UPD’s Turnaround

Despite initial challenges, UPD reported improved turnover and profitability in the second half of the year. The business was impacted by the lower increase in the regulated single exit price (SEP) of medicines and operational challenges during the implementation of new systems in three of its distribution centers. However, the operational metrics in the distribution centers have now normalized.

Margin Expansion

Clicks Group’s financial success was further highlighted by margin expansion. The retail margin grew by 130 basis points, benefiting from strong growth in higher-margin private label products and the recovery in the beauty category. Additionally, the distribution margin expanded by 20 basis points due to improved management of shrinkage and waste in UPD.

Robust Cash Generation

Clicks Group’s prudent financial management was evident in the robust cash generation of R5.9 billion. This strong cash position allowed the company to invest in its future growth and provide returns to its shareholders.

Looking Ahead: Navigating Challenging Times

The economic outlook remains uncertain, and Clicks Group acknowledges that trading conditions are expected to remain extremely constrained in the new financial year. However, the company’s resilient business model, defensive approach, and proven adaptability to changing market dynamics provide confidence in its ability to weather challenges.

Commitment to Growth

Clicks Group is committed to pursuing organic growth opportunities. In the upcoming financial year, the company plans to open 40 – 50 new stores and 40 – 50 pharmacies, aligning with its longer-term target of 1,200 stores. A capital investment of R880 million is slated for the 2024 financial year, including investments in new stores, pharmacies, refurbishments, supply chain enhancements, and technology infrastructure.

Final Dividend for Shareholders

The board of directors of Clicks Group has approved a final gross ordinary dividend of 494.0 cents per share for the period ending on August 31, 2023, compared to 457.0 cents per share in the previous year. Shareholders are reminded that Dividends Tax (DT) of 20% will be withheld in terms of the Income Tax Act, resulting in a net dividend of 395.2 cents for those not exempt from DT.

Salient Dates for Shareholders

Shareholders are advised of the following key dates in relation to the final dividend:

  • Last day to trade “cum” the dividend: Tuesday, January 23, 2024.
  • Shares trade “ex” the dividend: Wednesday, January 24, 2024.
  • Record date: Friday, January 26, 2024.
  • Payment to shareholders: Monday, January 29, 2024.

During the period from January 24 to January 26, 2024, share certificates may not be dematerialized or re-materialized.

Conclusion

Clicks Group’s 2023 annual results reflect a compelling narrative of resilience, growth, and adaptability. In the face of challenging economic conditions and the impact of civil unrest, the company has not only weathered the storm but has also expanded its market presence and delivered value to shareholders. As the journey continues, Clicks Group remains committed to its long-term growth targets and solidifying its position as a leading health and beauty retailer in South Africa.

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