Clicks Group lifts earnings 9% in challenging retail environment
Cape Town – Clicks Group today reported a 13.6% increase in turnover to R17.5 billion for the year to August 2013 while the group’s return on equity remains the highest in the retail sector at 55.6%.
Diluted headline earnings per share increased by 9.2% to 298.6 cents and the total dividend was increased by 10.5% to 168 cents per share.
Chief executive, David Kneale, said middle income consumers in the Clicks target market have remained under pressure over the past year.
“This pressure is evident in the low level of real growth in the private healthcare market and the continued reliance on promotional activity to drive volume in the health and beauty markets,” he said.
Selling price inflation remained low and averaged 2.6% for the year.
The Clicks chain increased sales by 8.6% for the year, with stronger sales growth of 10% for the second half. Kneale said Clicks has strengthened its competitive position by gaining share in all its core health and beauty markets.
Clicks opened a net 22 new stores to extend its footprint to 442, with 331 in-store pharmacies. The Clicks ClubCard loyalty programme passed the 4 million mark in active members during the year.
Musica continued to gain market share in CDs and DVDs, despite the net closure of 14 stores. The brand’s comparable store sales increased by 5.9%. The Body Shop increased turnover by 11.3%, benefiting from the opening of four new stores during the year.
UPD’s integrated pharmaceutical wholesale and distribution strategy continues to gain traction and the business increased total managed turnover by 43.9% to R11.5 billion. This includes wholesale turnover and notional turnover managed on behalf of its 20 distribution agency clients. UPD has grown its private pharmaceutical wholesale market share from 24.3% to 26.7%.
Operating profit increased by 9.1% to R1.1 billion. The faster growth rate in the lower margin UPD business resulted in the group operating margin reducing by 30 basis points to 6.3%.
The group remains strongly cash generative with cash inflow from operations increasing 32.6% to R1 billion. The group returned R748 million to shareholders through dividend payments and share buy-backs, bringing to R3 billion the amount returned to shareholders over the past five years.
Discussing the outlook for the year ahead, Kneale said the current weak consumer spending environment is expected to continue. “Trading over the important festive season will therefore be critical to performance in the year ahead,” he added.
Capital expenditure of R338 million has been committed for 2014 for stores and pharmacies, IT systems and expanding distribution capacity in UPD. Clicks plans to open 25 new stores and 20 - 25 pharmacies in the year ahead.