Investment case

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

This investment case is complemented by the strategic objectives and drivers of longer-term growth outlined in the group strategy report.

Healthcare markets are defensive and growing

  • Over 80% of group turnover is in defensive merchandise categories
  • Trading through the Covid‑19 pandemic demonstrated the resilience of the business and the markets in which it operates
  • Improving living standards, increasing urbanisation and longer life expectancy is contributing to a growing market for health and beauty products

Market leadership

  • Clicks is the largest retail pharmacy chain in South Africa
  • UPD is the country’s leading national full-range pharmaceutical wholesaler
Lady holding product

Convenient and expanding retail footprint

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

  • Over 740 Clicks stores
  • 74% of stores located in convenience and neighbourhood shopping centres, which proved beneficial during the Covid‑19 pandemic
  • Targeting to open 25 – 30 stores each year

Expanding pharmacy network

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

  • 585 pharmacies in Clicks stores
  • Targeting to open 30 – 35 pharmacies each year
  • Retail pharmacy market share goal of 30% in the long term (2020: 23.8%)

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 23%
  • Clicks offers differentiated and exclusive health and beauty international franchise brands such as The Body Shop, GNC and Claire’s

Growing personalisation and engagement

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

  • 8.6 million active ClubCard members generate 78.2% of sales
  • Online store offers full Clicks product range for in-store collection or home delivery as well as online-only offers
  • Investment in online and digital capability positioned Clicks to manage the significant growth in e‑commerce during the Covid‑19 lockdown

Globally competitive operating margins

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

  • Retail: 9.1% (medium-term target 8.5% – 9.5%)
  • UPD: 3.3% (medium-term target 2.5% – 3.0%)

Robust supply chain

Centralised supply from company-owned distribution centres to all retail stores (97.6% 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

EFFICIENT cash and capital management

  • Highly cash-generative business
    • R11.0 billion cash generated from operating activities before dividends paid over past five years
  • Returns enhanced through active capital management
    • R5.0 billion returned to shareholders in dividends and share buy-backs in past five years
  • Well-invested store base and supply chain
    • R2.9 billion capital expenditure in past five years

Sound environmental, social and governance PRACTICES

  • Standard of ESG practices recognised with group’s inclusion in FTSE4Good Index
  • R593 million invested in training and development over past five years
  • Experienced, independent, diverse and well-balanced board