Investment case

The following factors motivate an investment case and highlight how the group’s business model, strategy and organic prospects in the expanding health and beauty markets are expected to sustain growth.

Market leadership

All businesses in the group occupy market-leading positions

• Clicks independently rated as South Africa’s first choice for health and beauty
  
• Largest retail pharmacy network with 283 in-store dispensaries
  
• UPD is the only national full-range pharmaceutical wholesaler in the country
  
• Increasing sales and profit contribution from core health and beauty business
  

Resilient business model

Over 75% of the group’s turnover is in non-cyclical merchandise

• Business therefore more resilient to economic downturn
  
• As a cash retailer Clicks not as interest rate sensitive as its credit-based peers
  

Price competitiveness

As a value retailer Clicks is highly price competitive relative to food retailers

Expanding store base

Clicks plans to grow store base from 400 to 500 in the medium term

• National portfolio of convenient and well-located stores
  
• Committed to opening 20 – 30 stores each year
  
• Opportunity to expand well beyond 500 stores in the longer term
  

Expanding pharmacy base

Objective is to operate a pharmacy and clinic in every Clicks store

• Opportunity to increase pharmacy base by at least 200
  
• Clicks has 15.4% retail pharmacy market share and a goal to grow to 30% in the long term
  
• Dispensaries take at least four years to reach maturity and 29% of pharmacies are less than two years old, showing potential for further sales and profit growth in these stores
  

Entrenching customer loyalty

Clicks ClubCard is one of the largest loyalty programmes in the country with 3.4 million active members

• ClubCard holders already generate over 76% of Clicks sales
  
• Target to achieve 5 million ClubCard members by 2014
  

Increasing private label sales

Clicks private label and exclusive brands offer differentiated product at higher margins and engender customer loyalty

• Clicks targeting to grow private label to 25% of sales from the current 18.2%
  
• Private label medicines will in the longer term become a revenue stream for Clicks and will be distributed by UPD
  

UPD growth opportunities

UPD provides the distribution capability for the group’s integrated healthcare strategy

• As the country’s only national full-range pharmaceutical wholesaler, UPD has scale advantage over its competitors
  
• Benefit from growth in Clicks Pharmacy, Clicks Direct Medicines and increasing loyalty from the Link pharmacy network
  
• Positioned to grow third party agency distribution contracts
  

Highly cash-generative business

Capital actively managed through share buy-backs, managing distribution cover levels and investing for organic growth

• R3.4 billion returned to shareholders in the past five years through distributions and share buy-backs
  
• Capital expenditure of over R1 billion in the past five years, mainly on new stores and pharmacies, store refurbishments and information technology
  

Sustained financial performance

• ROE more than trebled over past five years from 16.7% to 62.2%
  
• Diluted headline earnings per share: 28.6% five-year annual compound growth
• Distributions per share: 30.4% five-year annual compound growth