Cape Town – Clicks Group continued to show the defensiveness of its core health and beauty business and increased operating profit by 13.5% to R1.9 billion in the six months to February 2024 as the group strengthened margins, generated robust cash flows and increased returns to shareholders.
Retail turnover grew by 12.4% with group turnover up 9.0% to R21.8 billion. The group’s operating margin expanded by 30 basis points to 8.5%.
Headline earnings grew by 10.5% to R1.3 billion with diluted headline earnings per share (HEPS) increasing 13.0% to 534 cents, benefiting from share buybacks undertaken in the last 12 months.
The interim dividend was increased by 13.5% to 210 cents per share.
The group returned R2 billion to shareholders in dividends and share buybacks in the half year. Since the start of the group’s share buyback programme in 2006, R19.1 billion has been returned to shareholders in dividends and buybacks.
Chief executive Bertina Engelbrecht said the Clicks chain delivered strong turnover and profit growth in an environment of growing pressure on consumer disposable income, driven mainly by the higher demand for beauty and personal care products.
Clicks increased its share of the retail pharmacy market from 23.5% to 24.3% with the front shop health market share increasing from 32.7% to 33.2%. Sales of private label products grew by 14.3% and now account for 31% of front shop sales in Clicks.
The iconic Clicks ClubCard loyalty programme grew membership to 11 million, adding 1 million new members in the past year. ClubCard customers contribute 82% of sales in Clicks.
Clicks opened its 900th store in February as the brand expanded its footprint to 902 stores with the opening of a net 41 new stores in the past year. Clicks plans to accelerate its store expansion programme by opening 50 – 55 stores for the 2024 financial year, with the longer-term target of expanding to 1 200 stores.
A further 27 pharmacies were opened, extending Clicks’ pharmacy presence to 718. Currently 51% of the country’s population live within 5 kilometres of a Clicks pharmacy, highlighting the convenience of the pharmacy chain.
Engelbrecht said the acquisitions of Sorbet, M-Kem and software development company 180 Degrees, completed in the previous financial year, have been successfully integrated and “are performing ahead of pre-acquisition expectations”.
The group’s pharmaceutical wholesaler UPD grew turnover by 1.3% to R8.1 billion. “Following the completion of the large-scale systems implementation early in the reporting period, UPD is positioned for growth and will also benefit from the higher increase granted in the regulated single exit price of medicines this year,” she said.
On the outlook for the second half of the financial year, Engelbrecht said consumer spending will remain constrained owing to inflationary cost pressures,. “The trading environment could be further impacted by potential disruption ahead of the general election in May and the resumption of load shedding.”
Engelbrecht said the group is forecasting to increase diluted HEPS by 10% to 15% for the 2024 financial year, supported by the organic growth momentum in Clicks and a stronger second half performance from UPD.