Chairman’s report

South Africa is in a significantly different place to where it was when we last wrote to shareholders a year ago.

Recent political and economic developments have been positive for the outlook for the country and consumers, none more so than the formation of the Government of National Unity which followed the general elections in May.

The stability following the establishment of the new government, together with the strengthening of the Rand, interest rate relief on the back of declining inflation, declining fuel costs and the extended absence of load shedding, contributed to consumer confidence reaching a five-year high in the third quarter of 2024.

The improving consumer sentiment is expected to translate into increased spending in the next 12 to 18 months and create a platform for more robust economic growth in the country.

However, in the absence of any short-term catalysts to boost spending in the past year, the consumer environment remained constrained. Clicks was well positioned to respond to this muted discretionary spending with the resilience of its business model and defensiveness of its core product offering.

Industry-leading performance

Group turnover increased by 9.2% to R45.4 billion with Clicks producing another excellent performance off a high base and UPD delivering stronger second-half results following the completion of its wide-scale systems implementation. Diluted headline earnings per share (HEPS) increased by 14.3% and the total dividend was increased by 14.3% to 776 cents per share, based on a 65% dividend payout ratio. The group produced an industry-leading return on equity of 46.4%.

The group generated cash inflows from operations of R6.0 billion and returned R2.5 billion to shareholders in dividend payments and share buybacks. The strong balance sheet and robust cash flows enables the group to reinvest for growth and approximately R1 billion is planned for investment in each of the next three years.

In delivering these financial results, the group achieved all of its published medium-term financial targets. The targets for the group trading margin and retail trading margin have been revised upwards, confirming the board’s confidence in the organic growth prospects of the group.

The performance also maintains the group’s consistent growth momentum and trajectory. Over the past 10 years, diluted HEPS has grown at a compound rate of 13.5% per annum and dividends per share by 15.1% per annum.

Shareholders have been well rewarded. Since 2014 the Clicks Group share price has grown at a 10-year compound annual growth rate (CAGR) of 18.5% relative to the growth of 7.1% in the Food and Drug Retailers Index and the 5.1% increase in the Top 40 Index.

The total shareholder return, based on share price appreciation and the reinvestment of dividends, has generated a 10-year CAGR of 20.7% per annum.

More than R14.5 billion has been returned to shareholders in dividends and share buybacks in the past 10 years, underpinning the quality and premium rating of the Clicks Group share.

Chairman succession

In last year’s integrated report we advised shareholders that I would be retiring from the board when my term of office comes to an end at the annual general meeting (AGM) in January 2025. Following a rigorous selection process, we announced independent non-executive director Mfundiso “JJ” Njeke as my successor.

A seasoned chartered accountant, experienced businessman and astute company director, JJ has served on Clicks Group’s board and audit and risk committee since 2020. He was appointed as chair of this committee as well as our lead independent director in 2022.

We are pleased to appoint a successor from within the ranks of the current board which will ensure continuity in leadership and oversight. It is important to reassure shareholders that the appointment of the new chairman does not signal a shift in the proven strategic direction of the group. JJ has been integral to the development and endorsement of the strategy over the past four years and enjoys the full confidence and support of his fellow directors.

Board developments

One of our board stalwarts, John Bester, retired as a director in February 2024 after serving on the board since 2008. John also chaired the audit and risk committee with distinction over several years and we wish him a healthy and fulfilled retirement.

Following the January 2025 AGM, all six of our non-executive directors will have served on the board for five years or less.

Owing to his appointment as chairman, JJ Njeke will not be eligible for re-election to the audit and risk committee which he currently chairs. The directors are proposing Christine Ramon to be appointed as chair of the committee. She is an experienced financial executive with extensive board expertise, including serving as chair and a member of the audit committees of large listed and unlisted entities.

Following the AGM in January 2025, the board will elect a new lead independent director to replace JJ.

Farewell and thank you

I have had the honour of serving as a non-executive director since the listing of New Clicks Holdings, as the company was then known, on the JSE in 1996. I was appointed as chairman of the board in May the following year.

However, my association with Clicks predates this by some years. As a young commercial lawyer working with the late Arnold Galombik from the late 1970s, I provided legal services for the Clicks business in the Jack Goldin era, serving as an alternate director to Clicks Limited until the business was sold and delisted. I returned to the board when the company was relisted in 1996.

It has been an extraordinary journey since then, witnessing first-hand the stellar growth in the business. The group’s market capitalisation has grown from R952 million at the time of listing to R89.0 billion at the year-end in August 2024, a growth of 9 248%. Over this 28-year period, R20 billion has been returned to shareholders in dividends and share buybacks. An investment of R10 000 in Clicks Group shares at the listing in 1996 would have grown to R2.1 million, including the reinvestment of dividends.

It is interesting that several companies who considered acquiring Clicks in those early days are now considerably smaller than Clicks Group by market capitalisation.

By far the most rewarding benefit of my time with the group has been the privilege of meeting and working with so many truly wonderful people who have contributed, both as executives and as non-executives, to building this iconic South African success story. There are simply too many to mention. You know who you are and I am eternally grateful to each and every one of you. You can all feel justifiably proud of the invaluable contributions you have made.

Our founder Jack Goldin would be both immensely proud and incredulous at what has become of his inspired conception.

Acknowledgements

In concluding my final report to shareholders ahead of my retirement, I extend my congratulations to my successor JJ Njeke on his appointment and wish him every success in leading this great company.

My fellow non-executive directors provide outstanding governance and oversight support and it has been a privilege to serve on the board with you.

The group’s sustained growth and industry leadership over so many years is a tribute to the quality of our management and staff. Thank you to our CEO Bertina Engelbrecht, CFO Gordon Traill and the group executive team who lead by example in supporting and motivating staff to exceed the expectations of our stakeholders.

Thank you to our 19 600 employees at head office, stores and distribution centres across the country for a job well done.

Thank you to our external stakeholders, including our customers, shareholders, suppliers and regulators, for their continued support and engagement.

 

David Nurek
Independent non-executive chairman