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Investment case

Clicks Group offers sustainable growth opportunities for equity investors seeking non-cyclical exposure to the retail and healthcare sectors in South Africa.

The strategic drivers of longer-term growth outlined in the group strategy provide further context for the investment case.

Positioned in growing markets

Well positioned in growing markets

Healthcare markets are defensive and growing in South Africa

  • An increasing proportion of the population is 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
Resilient value adding business model

Resilient value adding business model

Over 80% of group turnover is in defensive merchandise categories

  • As a value retailer Clicks is price competitive with national retailers

Globally competitive operating margins

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

  • Retail: 8.1% (medium-term target 7.5% – 8.5%)
  • UPD: 2.7% (medium-term target 2.5% – 3.0%)

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

Expanding retail footprint

Goal to expand Clicks store base in South*nbsp;Africa to 900 in the long term

  • Over 660 conveniently located Clicks stores
  • Targeting to open 25 – 30 stores each year

Expanding pharmacy base

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

  • 510 pharmacies in Clicks stores
  • Targeting to open 30 – 35 pharmacies each year
  • Retail pharmacy market share goal of 30% in the long term (2018: 23.3%)
  • Primary care clinics in 203 Clicks stores

Differentiated product offer

Private label and exclusive brands offer differentiated ranges at higher margins

  • Target to grow private label to 25% of total health and beauty sales; currently 22%
  • Exclusive health and beauty brands such as The Body Shop, Sorbet, GNC and Claire’s differentiate Clicks offer
Trusted quality

Growing customer loyalty and engagement

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

  • 7.8 million active ClubCard members generate 77.2% of sales
  • Online store offers full Clicks product range for in-store or home delivery as well as online only offers
  • Digital channels support store offering

Efficient group supply chain

Centralised supply from company-owned distribution centres to all retail stores (96.9% of product through centralised distribution)

  • UPD provides an efficient healthcare supply chain channel for Clicks
  • UPD also offers wholesale and distribution services to pharmaceutical manufacturers

Effective cash and capital management

  • Highly cash-generative business
    • R6.3 billion cash generated by operations over past three years
  • Returns enhanced through active capital management
    • Return on equity averaging 43.8% over past three years
    • R2.4 billion returned to shareholders in dividends and share buy-backs in past three years
  • Well-invested store base and supply chain
    • R1.6 billion capital expenditure in past three years