Chief Financial Officer’s

Clicks Group delivered another resilient performance with robust turnover growth in Clicks and UPD, efficient cost management and sustained strong cash generation despite significant headwinds in the trading environment.

The civil unrest in KwaZulu-Natal (KZN) in July 2021 had a major financial impact on the group. Operating profit was reduced by R148 million and headline earnings by R107 million, equating to a reduction of 43.1 cents in diluted headline earnings per share (HEPS) for the year.

Diluted HEPS from continuing operations increased by 2.6% to 793.7 cents. Adjusting for the impact of the civil unrest, diluted HEPS increased by 8.8% to 836.8 cents.

The group declared a total dividend of 490 cents per share based on a 63.3% payout ratio. The final cash dividend of R853 million will be paid to shareholders in January 2022.

After returning R2.2 billion to shareholders in dividends and share buy-backs, cash on hand totalled R2.2 billion at year-end.

Michael Fleming

Impacts on financial reporting

The group is reporting financial information separately for continuing and discontinued operations following the closure of Musica in May 2021. The civil unrest in KZN in July 2021 had a significant impact on the group’s financial results and the disclosure of the performance has been adjusted for this impact. The current reporting period includes the impact of Covid-19 for 12 months compared to six months in the prior reporting period.

Impact of civil unrest

The group is fully insured against the risk of civil unrest as well as being covered for business interruption. The total South African Special Risks Insurance Association (SASRIA) claim for damages in the recent civil unrest amounts to R726 million:

  • inventory of R522 million (carrying value R334 million);
  • fixed assets of R181 million (carrying value R61 million); and
  • additional costs of R23 million covered under the SASRIA policy.

The group incurred additional costs for private security services to protect the UPD and Clicks distribution centres and air transportation costs to supply UPD customers in KZN.

The first interim payment of the insurance claim of R217 million (excluding VAT) has been received and is accounted for in the 2021 financial year. The balance of the insurance proceeds are expected to be recognised in the 2022 financial year. The business interruption claim has not yet been finalised.

The impact on the major line items in the statement of comprehensive income are as follows:

Continuing operations

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R’million Reported
Adjustments for civil unrest Adjusted
Turnover 37 339 37 339
Gross profit 7 272 334 Stock written off 7 606
Other income 2 609 (217) Insurance claim received to date 2 392
Expenses (6 984) 31 Costs relating to civil unrest (6 953)
Operating profit 2 897 148 3 045
Impairment of property, plant and equipment (61) 61
Taxation (728) (58) (786)
Headline earnings 1 961 107 2 068
Diluted headline earnings per share (cents) 793.7 43.1 836.8

Financial performance

The analysis of the group’s financial performance for the year ended 31 August 2021 focuses on the key line items of the statements of comprehensive income and financial position which management considers material to shareholders’ understanding of the group’s performance.

The following review should be read together with the annual financial statements as well as the summary statements of comprehensive income and financial position, and the five-year analysis of financial performance.

Statement of comprehensive income


Group turnover increased by 10.2% to R37.3 billion (2020: R33.9 billion). Selling price inflation averaged 2.7% for the year.

Retail health and beauty turnover, including Clicks, The Body Shop, GNC and Claire’s, increased by 8.3% despite the impact of Covid-19 and the civil unrest in KZN. Retail selling price inflation averaged 3.2%. Comparable stores sales grew by 5.1%.

Growth in trading space accounted for 3.2% of the retail turnover growth, with the net opening of 39 Clicks stores and 36 pharmacies.

Distribution turnover grew by 12.3%, driven mainly by medicine sales in the third wave of the Covid-19 pandemic from June to August 2021.

The trading performances of Clicks and UPD are covered in the business review.

Turnover, operating profit and margin

* Pre-IFRS 16 operating profit and margin.
Total income

Total income on an adjusted basis grew by 8.4% to R10.0 billion (2020: R9.2 billion).

The retail total income margin was 10 basis points lower owing to the impact of product mix changes and promotions. The increased proportion of private label sales partially compensated for lower sales of higher‑margin beauty products.

UPD’s total income margin strengthened by 10 basis points to 8.6% due to the growth in the bulk distribution business. This off-set the lower medicine single exit price (SEP) increase of 3.68% in February 2021 compared to 4.53% in February 2020.

The faster growth of the distribution business resulted in a mix change which contributed to the group’s total income margin declining by 40 basis points to 26.8%.

Operating expenditure

Retail operating expenditure as a percentage of turnover improved to 23.7% (2020: 23.8%) reflecting the increasing efficiency in the retail cost base.

Adjusted retail expenses were held below turnover growth and grew by 7.7%. Costs include the addition of new space, with 39 Clicks stores and 36 pharmacies opened during the year.

Comparable retail costs were contained to an increase of only 4.0%.

UPD expenses on an adjusted basis increased by 14.9%, well below the 20.6% growth in UPD’s total managed turnover. Additional wholesale and distribution contracts have resulted in higher labour and transport costs and UPD has rented a third-party distribution warehouse to accommodate the increased volumes.

The group’s operating expenses increased by 9.0%.

Operating profit

Adjusted group operating profit increased by 8.2% to exceed R3 billion (2020: R2.8 billion) for the first time, with the group’s operating margin 10 basis points lower at 8.2%.

The retail and distribution businesses both maintained margin despite the headwinds in the trading environment, with the faster growth of UPD marginally reducing the group margin.

Return on equity (ROE)

Statement of financial position

The ratio of shareholders’ interest to total assets declined from 34.0% to 28.0% as the group returned R2.2 billion to shareholders. The ratio of current assets to current liabilities at year-end was 1.1 times (2020: 1.2 times), indicating that working capital remains adequately funded. Other current assets include R2.2 billion in cash.

The group continues to hedge direct exposures to foreign exchange rate fluctuations which impact approximately 8% of the cost of sales in the retail business. In addition, the group hedged elements of the long-term incentive scheme for the 2021 to 2023 period. Further detail on the respective hedges and risk management is contained in note 27 in the annual financial statements on the group’s website.

Working capital

The group’s net working capital days improved from 37 to 30 days.

Group inventory days were consistent with the prior year at 66 days. Retail inventory days were higher at 74 days (2020: 71 days) owing to the restocking of the Clicks distribution centre in KZN following the civil unrest. UPD reduced stock days from 38 to 35 days.

Capital expenditure


Cash and capital management

Cash generated from operating activities before dividends paid totalled R3.8 billion and increased by 61.6% on the prior year.

The group secured short-term extended creditor terms on stock looted in the KZN civil unrest while waiting for the settlement of the insurance claim from SASRIA.

The group’s capital management strategy is focused on investing in the organic growth of the business and returning surplus funds to shareholders through dividends and share buy-backs:

  • Capital expenditure of R690 million was reinvested across the group. This included R306 million for new stores, pharmacies and the refurbishment of 41 Clicks stores; R77 million on distribution centres; and R307 million on information technology (IT) and retail infrastructure.
  • The group returned R2.2 billion to shareholders through dividend payments of R1 469 million and share buy-backs of R752 million.

At year-end, the group held cash resources of R2.2 billion.

Information technology

Management aims to ensure IT systems and infrastructure are well maintained and remain relevant to future needs of the business.

During the year the group invested R72 million on computer hardware and R163 million on computer software.

The group is focusing the major portion of IT investment on replacement software solutions for certain core systems within the retail and distribution businesses.

The design, development and implementation of these new best-in-class systems have commenced and will continue during 2022 on a risk-mitigated basis. These investments comprise three projects:

  • integrated retail merchandising system incorporating modules for demand forecasting and fulfilment, pricing and promotions, category assortment optimisation and space management;
  • UPD warehouse management system; and
  • cloud-hosted enterprise resource planning (ERP) upgrade for UPD.

Cash flow analysis


Cash Flow Analysis


A dividend of 490 cents per share (2020: 450 cents) was declared for the financial year, based on a dividend payout ratio of 63.3% (2020: 60%) of HEPS.


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R’million 2021 % of
% of
Turnover 37 339 33 889 10.2
     Retail 26 329 70.5 24 310 71.7 8.3
     Distribution 17 378 29.5 15 474 28.3 12.3
     Intragroup (6 368) (5 895)
Total income 9 881 26.5 9 221 7.2
Operating expenses (6 984) 18.7 (6 408) 9.0
     Retail (6 263) (5 789) 8.2
     Distribution (930) (804) 15.7
     Intragroup 209 185
Operating profit 2 897 7.8 2 813 8.3 3.0
     Retail 2 398 9.1 2 306 9.5 4.0
     Distribution 533 3.1 513 3.3 3.9
     Intragroup (34) (6)
Loss on disposal of property, plant and equipment (4) (6)
Impairment of property, plant and equipment (61)
Loss on disposal of business (1)
Net financing expense (186) (169)
Share of (loss)/profit of associates (4) 2
Income tax (728) (720) 1.1
Loss from discontinued operations, net of tax (76) (39)
Profit for the year 1 838 1 880 (2.2)
* Restatement relating to the disclosure of the Musica business as a discontinued operation.

Summary statement of financial position

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R’million 2021 2020 %
Non-current assets 5 935 5 531 7.3
     Property, plant and equipment 2 138 2 121 0.8
     Right-of-use assets 2 602 2 371 9.7
     Other non-current assets 1 195 1 039 15.0
Current assets 11 238 9 743 15.3
     Inventories 5 449 4 921 10.7
     Trade and other receivables 3 473 2 567 35.3
     Other current assets 2 316 2 255 2.7
Total assets 17 173 15 274 12.4
Equity 4 805 5 194 (7.5)
Non-current liabilities 2 173 1 940 12.0
Current liabilities 10 195 8 140 25.2
     Trade and other payables 8 752 6 747 29.7
     Other current liabilities 1 443 1 393 3.6
Total equity and liabilities 17 173 15 274 12.4

Financial plans for 2022

Capital expenditure of R846 million is planned for the 2022 financial year. This includes R168 million for the replacement of assets damaged in the KZN unrest and R46 million carried forward due to delays caused by the impact of Covid-19.

  • R495 million will be invested in the store portfolio. This includes 25 to 30 new Clicks stores, 30 to 35 new pharmacies, 45 store refurbishments to ensure stores remain modern and relevant to customers as well as completing the restoration of stores damaged in the civil unrest.
  • R351 million for IT systems and infrastructure which includes R277 million in retail systems and infrastructure, and R74 million on UPD IT systems and warehouse equipment.

Retail trading space is expected to increase by approximately 5% in 2022.

Medium-term financial targets

Financial targets are disclosed to provide guidance to shareholders on the group’s medium-term performance expectations.

The group’s medium-term financial targets rank in the upper quartile relative to comparable global health and beauty retailers such as Walgreens Boots Alliance (USA), CVS (USA), Raia Drogasil (Brazil) and McKesson Europe.

In the 2021 financial year the group achieved its medium-term targets with the exception of the return on equity which is marginally outside the range. Management is confident that over the medium term this return metric will improve to within the targeted range.

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Medium-term targets 2021
Return on equity (%) 38.2 40 – 50
Return on invested capital (%) 25.9 20 – 30
Return on assets (%) 11.8 11 – 15
Net working capital days (%) 30 30 – 35
Group operating margin (%) 8.2* 8.0 – 9.0
     Retail 9.5* 9.0 – 10.0
     Distribution 3.3* 2.8 – 3.3
Dividend payout ratio (%) 63.3 60 – 65
* Continuing operations, adjusted for impact of civil unrest.

The targets are reviewed annually to take account of the group’s current performance and the medium-term outlook for trading.

The operating margin target range for the retail and distribution divisions and the group have been increased, confirming the organic growth prospects in the business. While the distribution division is currently delivering a margin of 3.3% which is at the top end of the targeted range, management believes this is a sustainable margin range given the ongoing impact of genericisation.


Thank you to our shareholders and the broader investor community for your virtual engagement with the group over the past year and we look forward to resuming in-person meetings where possible in the months ahead. I also extend my thanks to the finance teams across the business for their support in ensuring that the group meets the highest standards of disclosure and corporate reporting.

Michael Fleming

Michael Fleming

Chief financial officer