Investment Case

Clicks Group offers attractive growth prospects for investors seeking long-term and non-cyclical equity exposure to the retail and healthcare sectors in South Africa. The group’s business model, focused strategy and organic growth potential in the expanding health and beauty markets are expected to generate competitive and sustainable returns for shareholders.

Market leadership

All businesses in the group occupy market leading positions
  • Clicks is independently rated as South Africa’s first choice health and beauty retailer
  • Largest retail pharmacy network with 306 in-store dispensaries
  • UPD is the only national full-range pharmaceutical wholesaler in the country

Resilient business model

Over 75% of the group’s turnover is in non-cyclical merchandise
  • Increasing sales and profit contribution from health and beauty business
  • As a value retailer Clicks is highly price competitive relative to food retailers
  • As a cash retailer Clicks is not as interest rate sensitive as credit-based peers

Expanding store base

Clicks plans to grow store base from 420 to 500 in the next three years
  • 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
  • Currently only 73% of stores have a dispensary
  • Plan to open 30 – 40 dispensaries each year

Entrenching customer loyalty

Clicks ClubCard is one of the largest loyalty programmes in South Africa
  • 3.9 million active ClubCard members
  • ClubCard holders generate over 77% of Clicks sales
  • Growing loyalty through range of affinity partners
  • Target to achieve 5 million ClubCard members by 2014

Increasing private label sales

Clicks private label and exclusive brands offer differentiated products at higher margins and engender customer loyalty
  • Targeting to grow private label to 25% of sales from the current 18.4%
  • Private label medicine range will become a longer-term revenue stream for Clicks and will be distributed by UPD

UPD growth opportunities

As the country’s only national full range pharmaceutical wholesaler, UPD has scale advantage over its competitors
  • Strong growth in third party agency distribution contracts in 2012
  • Preferred supply partner for Aspen Pharmacare, the country’s largest pharmaceutical company
  • Continued investment in distribution capacity
  • Benefit from growth in Clicks Pharmacy and private hospitals

Growing market share

Group has a commanding share of the retail and wholesale pharmaceutical markets
  • Clicks has 16.2% retail pharmacy market share and a goal to grow to 30% in the long term
  • UPD’s share of the private pharmaceutical market increased
    to 24.3%

Highly cash-generative business

Capital actively managed through investing for organic growth, share buy-backs, and managing distribution cover levels
  • R3.1 billion returned to shareholders in past five years through distributions and share buy-backs
  • Capital expenditure of over R1.1 billion in the past five years, mainly on new stores and pharmacies, store refurbishments, distribution capacity and information technology

Sustained financial performance

Group has a track record of sustained performance and returns to shareholders
  • ROE more than doubled over past five years to 59.9%
  • Diluted headline earnings per share: 21.6% five-year annual compound growth
  • Distributions per share: 25.8% five-year annual compound growth