Clicks Group earnings up 10% as spending remains constrained
Cape Town – Clicks Group today reported a 10.3% increase in diluted headline earnings per share to 157.4 cents for the six months to February 2014 as consumer spending in the country remains constrained.
The group posted a sector-leading return on equity of 55.4% and the interim dividend was increased by 10.3% to 53.5 cents per share.
Group turnover rose by 9.6% to R9.3 billion, with retail sales growing by 7.4% and UPD by 14.7%.
Group chief executive, David Kneale, said the Clicks chain is maintaining its competitive position amidst demanding trading conditions which are impacting on its middle income target market. “The brand’s strong value offer is driving sales growth as the health and beauty markets remain resilient,” he said.
Clicks increased sales by 8.2% with comparable store sales growing by 5.3%. The Clicks chain extended its national store footprint to 453, with 333 dispensaries and 133 clinics. Active membership of the Clicks ClubCard loyalty programme has grown to 4.3 million over the past six months.
Kneale said UPD’s integrated wholesale and distribution strategy is working well, reflected in turnover growth of 14.7%. UPD has grown its share of the private pharmaceutical market from 25.7% to 26.3%.
The group’s operating profit grew by 7.3% for the period and the operating margin declined by 10 basis points to 6.1%. Kneale said the operating margins for the group, as well as the retail and distribution segments, are within the targeted ranges despite the continued investment for longer-term growth which has been made in the current trading period.
The investment includes new stores, distribution capacity and the launch of GNC, the US-based global leader in health and wellness products, through an exclusive agreement for southern Africa. GNC products are now available in over 50 Clicks stores and the first stand-alone GNC store opened at the beginning of April.
During the past six months the group returned R399 million to shareholders through dividend payments and share repurchases, in line with the policy of returning surplus cash to shareholders.
Discussing the outlook for the remainder of the financial year, Kneale said the challenging consumer trading environment is expected to continue and the group is forecasting diluted HEPS growth of 8% to 12% for the year.
“In this environment we plan to improve delivery in Clicks by growing sales through our value offer, private label, pharmacy and ClubCard. Clicks will also continue to focus on the prudent management of margin and costs.”
He said UPD aims to extract value from the recent investments which have been made in wholesale automation and in distribution capacity while continuing to extract cost efficiencies across the business.
Capital expenditure of R347 million has been committed for the full financial year.