Cape Town – Clicks Group’s retail and distribution businesses both reported strong growth in the six months to February 2020 in an environment of low economic growth, constrained consumer spending and trading disruption due to load shedding, with the group’s diluted headline earnings per share growing by 14.4% to 338 cents.
Group turnover grew by 9.9% to R16.9 billion and profit after tax increased by 12.9%. The group had R2.3 billion cash on hand at the end of February.
Owing to the economic upheaval in the wake of the Covid-19 pandemic, the Clicks Group board has decided to preserve cash and not declare an interim dividend, and will consider an annual dividend at the end of the financial year.
Chief executive of the Clicks Group, Vikesh Ramsunder, said retail health and beauty sales increased by 9.6% as Clicks gained market share across all its core product categories. Competitive pricing, differentiated product ranges, the Clicks ClubCard and new stores were the main drivers of growth, he said.
Clicks expanded its retail store footprint to 721 as 17 new stores were opened over the past six months. “The online store remains our fastest growing store. This is particularly evident during the lockdown as customers choose to stay safe and opt for the convenience of home delivery,” he said.
The pharmacy network increased to 572 with the opening of an additional 27 pharmacies, with “50% of the country’s population now living within 5 kilometres of a Clicks pharmacy”. Clicks grew its share of the retail pharmacy market from 24.1% to 24.6% at the end of February.
Clicks ClubCard membership increased to 8.4 million, with the loyalty programme accounting for 78% of sales in Clicks. ClubCard launched a new affinity partnership with Engen South Africa in December 2019 and earlier this month was appointed as the preferred health and beauty retail partner of the eBucks loyalty programme.
UPD, the group’s pharmaceutical distributor, grew wholesale turnover by 17.6% as the business gained new private hospital and buying group contracts. This contributed to UPD increasing its market share from 26.0% to 27.2% at February.
Discussing the Covid-19 pandemic, Ramsunder said Clicks Group responded swiftly to the crisis to align with government’s objective of flattening the curve.
“Covid-19 is a humanitarian crisis and as the country’s leading pharmacy chain we recognise that we have a critical role to play in protecting our staff and customers, and supporting communities.”
“WHO and NICD hygiene protocols were immediately introduced across our stores, pharmacies, distribution centres and offices. Protective screens were installed at store till points and pharmacy counters while protective visors were provided for all floor staff. Company-funded flu vaccinations were also offered to all our employees to support their immunity levels at this time,” he said.
Clicks has donated 10 000 units of flu vaccines to the Department of Health to help protect public healthcare workers. Free primary healthcare services are being offered at Clicks clinics daily to customers without medical cover.
The executive and non-executive directors have shown their commitment to supporting the fight against Covid-19 by donating 33% of their salaries and director’s fees to the Solidarity Fund over the next three months.
Clicks will pay customer care bonuses to store operational staff “in recognition of their courage and commitment in serving our customers during this very challenging period”.
Ramsunder said Clicks experienced unprecedented sales demand for hygiene and healthcare products following the declaration of the state of disaster and announcement of the national lockdown. This trend reversed during the lockdown, he said.
Group turnover for the first seven weeks of the second half of the financial year, which includes the first 24 days of the lockdown, increased by 15.9%.
Retail sales were 7.9% higher while health and beauty sales grew by 9.3%. During the lockdown Clicks has been restricted to shorter trading hours and limited to only selling essential products, while all Musica, The Body Shop and Claire’s stores are closed.
UPD increased sales for the seven-week period by 31.2% due to customers preparing to manage the impact of Covid-19.
On the outlook for the remainder of the financial year, Ramsunder said trading conditions are expected to be extremely tough while the economic impact of the Covid-19 pandemic is still unknown.
“Our strategy and business model remain relevant and resilient and will be severely tested in the months ahead. The group has a robust balance sheet, generates strong cash flows and we plan to open 38 new Clicks stores and 40 pharmacies in the financial year.”
“Despite the headwinds from the Covid-19 pandemic the group is well positioned in its core markets to respond to the needs of retail and distribution customers during this time of uncertainty and crisis,” he concluded.
Ends
Issued by Tier 1 Investor Relations on behalf of Clicks Group
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Graeme Lillie
Tier 1 Investor Relations
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