32.7%

total shareholder return
three-year CAGR

Investment Case

Clicks Group offers attractive organic growth prospects for investors wanting non-cyclical equity exposure to the South African retail and healthcare sectors.

1 Favourable market dynamics

Healthcare markets are defensive and growing in South Africa
Increasing proportion of population entering the private healthcare market
Improving living standards, increasing urbanisation and longer life expectancy is contributing to a growing market for health and beauty products

2 Resilient business model

Over 80% of group turnover is in defensive merchandise categories

As a value retailer Clicks is price competitive with national retailers
As a cash retailer Clicks is less interest rate sensitive than credit retailers

3 Market leadership

Clicks and UPD occupy market-leading positions

Clicks is the largest retail pharmacy chain in South Africa
UPD is the country’s only national full-range pharmaceutical wholesaler

4 Expanding retail footprint

Over 500 conveniently located Clicks stores

Targeting to open 25 stores each year
25 Clicks stores opened in 2016
Goal to expand Clicks store base in South Africa to 800 in the long term

5 Expanding pharmacy base

Objective to operate a pharmacy in every Clicks store in South Africa

Pharmacies currently in 82% of stores
Targeting to open 30 – 35 pharmacies each year
39 pharmacies opened in 2016
Retail pharmacy market share goal of 30% in the long term
Primary care clinics in 195 Clicks stores

6 Differentiated product offer

Private label and exclusive brands offer differentiated ranges at higher margins

Target to grow private label to 25% of total Clicks sales; currently 21%
Exclusive health and beauty franchise brands differentiate Clicks offer

7 Growing customer loyalty

ClubCard is one of the largest retail loyalty programmes in South Africa

6.2 million active ClubCard members generate 77% of sales
Target to reach 7.5 million members over the next three years

8 Efficient supply chain

UPD provides an efficient healthcare supply chain channel for Clicks

UPD offers wholesale and distribution services to pharmaceutical manufacturers
Centralised supply from company-owned distribution centres to all retail stores (96% of product through centralised distribution)

9 Effective cash and capital management

Highly cash-generative business
– R5.4 billion cash generated by operations over past three years
Returns enhanced through active capital management
– Industry-leading return on equity averaging 53.3% over past three years
– R2.3 billion returned to shareholders in dividends and share buy-backs in past three years
Well invested store base and supply chain
– R1.1 billion capital expenditure in past three years

10 Globally competitive operating margins

Retail and UPD operating margins rank in upper quartile of global drugstores and pharmaceutical wholesalers