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 drivers of longer-term growth outlined in the group strategy.
Healthcare markets are defensive and growing
- Over 80% of group turnover is in defensive merchandise categories
- Improving living standards, increasing urbanisation and longer life expectancy is contributing to a growing market for health and beauty products
- An increasing proportion of the population is entering the private healthcare market
Market leadership
Clicks and UPD occupy market-leading positions
- Clicks is the largest retail pharmacy chain in South Africa
- UPD is the country’s only national full-range pharmaceutical wholesaler
Convenient and expanding retail footprint
Goal to expand Clicks store base in South Africa to 900 in the long term
- Over 700 conveniently located Clicks stores
- Targeting to open 25 – 30 stores each year
Expanding pharmacy network
Objective to have a pharmacy in every Clicks store in South Africa
- 545 pharmacies in Clicks stores
- Targeting to open 30 – 35 pharmacies each year
- Retail pharmacy market share goal of 30% in the long term (2019: 24.9%)
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 22%
- Exclusive health and beauty brands such as The Body Shop, Sorbet, GNC and Claire’s differentiate Clicks offer
Growing personalisation and engagement
ClubCard is one of the largest retail loyalty programmes in South Africa
- 8.1 million active ClubCard members generate 77.6% of sales
- Digital channels enable personalised communication and promotional offers
- Online store offers full Clicks product range for in-store collection or home delivery as well as online only offers
Globally competitive operating margins
Retail and UPD operating margins rank in the upper quartile of global drugstores and pharmaceutical wholesalers
- Retail: 8.1%
- UPD: 3.3%
Efficient group supply chain
Centralised supply from company-owned distribution centres to all retail stores (97% 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
Effective cash and capital management
- Highly cash-generative business
- R7.4 billion cash generated by operations over past three years
- Returns enhanced through active capital management
- R2.7 billion returned to shareholders in dividends and share buy-backs in past three years
- Well-invested store base and supply chain
- R1.8 billion capital expenditure in past three years
Sound environmental, social and governance performance
- Standard of ESG practices recognised with group’s inclusion in the FTSE4Good Index
- Constituent of the FTSE/JSE Responsible Investment Top 30 Index
- Strong, independent, diverse and well-balanced board