Chief financial officer’s report

Clicks Group delivered a strong trading and operational performance in a constrained trading environment in the 2025 financial year, driven by expanding margins, disciplined cost management and robust cash inflows.

Diluted headline earnings per share increased by 14.1% to 1 362 cents as the group continued to generate superior returns to shareholders.

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The total dividend was increased by 14.2% to 886 cents per share (interim dividend 238 cents per share and final dividend 648 cents per share), based on a 65% dividend payout ratio. The final cash dividend totalling R1.5 billion will be paid to shareholders in January 2026.

The group remained highly cash generative, with cash inflows from operations increasing by R605 million to R6.6 billion. R2.7 billion was returned to shareholders in dividend payments and share buybacks while R985 million was reinvested in capital projects. At the financial year-end, the group held cash of R3.3 billion on the balance sheet.

The return on equity (ROE) increased to 49.2% from 46.4% in the prior year, far exceeding the average ROE of the other listed food and drug retailers in South Africa.

Financial performance

The analysis of the group’s financial performance for the year ended 31 August 2025 covers the key line items of the statements of comprehensive income and financial position which management considers material to shareholders’ understanding of the group’s performance.

The following review should be read together with the annual financial statements as well as the summary statements of comprehensive income and financial position, and the five-year analysis of financial performance.

Statement of comprehensive income

Turnover

Group turnover increased by 5.3% to R47.8 billion. Retail turnover, which includes Clicks, UniCare, The Body Shop and Sorbet corporate stores, increased by 6.0%. Turnover growth was slightly slower in the second half due to a higher number of store and pharmacy openings later in the year, declining inflation and a slower cold and flu season.

Comparable store turnover grew by 4.7% (excluding the additional trading day in the prior period) with inflation of 2.6% and volume growth of 2.1%.

Growth in store and pharmacy trading space accounted for 2.3% of the retail turnover growth, with the net opening of 55 new Clicks stores and 60 pharmacies.

Retail turnover increased by 7.0%, excluding Unicorn Pharmaceuticals (Unicorn), which was disposed of in the previous financial year.

Distribution turnover grew by 5.1% through increased purchasing compliance across UPD’s core wholesale channels of Clicks and the private hospital groups.

The trading performances of Clicks and UPD are covered in the business review.

 

Growth in turnover, trading profit and margin

Total income

Total income grew by 8.4% to R14.9 billion. The retail margin expanded by 70 basis points due to strong growth in higher-margin private label products and reduced shrinkage, while the recent investment in systems enabled the group to generate further supply chain efficiencies. The distribution margin declined by 10 basis points, impacted by the lower adjustment in the single exit price of medicines relative to the prior year.

The group’s total income margin expanded by 90 basis points to 31.1% as a result of the stronger growth in Retail relative to Distribution.

Trading expenditure

Retail costs grew by 7.9% mainly due to higher wage increases and increased pharmacy openings as well as higher utility and card acquiring costs. Comparable retail costs increased by 5.0% as cost growth slowed in the second half.

Distribution costs were very well managed, with expense growth contained to 1.9%. The investment in solar energy has delivered strong returns, with electricity, water and generator costs declining by 35% despite higher electricity costs. The investment in electric delivery vehicles has achieved further efficiencies, contributing to transport costs reducing by 0.2% year on year.

Trading profit

Group trading profit increased by 12.1% to R4.7 billion and the group’s trading margin increased by 60 basis points to 9.8%. Retail grew trading profit by 8.4% with the margin improving from 10.2% to 10.5% due to solid sales growth and a strong increase in other income, together with efficient cost management. If the intragroup profit from Unicorn is included, the retail trading margin expanded to 10.8%.

UPD increased trading profit by 9.0% and the margin by 10 basis points to 3.3%, due to the consistent sales growth and tight cost control.

Statement of financial position

The ratio of shareholders’ interest to total assets increased slightly to 30.4% (2024: 30.2%). The ratio of current assets to current liabilities at year-end was consistent with the prior year at 1.1 times, confirming that working capital remains adequately funded.

The group continues to hedge direct exposures to foreign exchange rate fluctuations which impact approximately 8.2% of the cost of sales in the retail business. Further detail on the respective hedges and risk management is contained in note 29 in the annual financial statements on the group’s website.

Working capital

The group’s net working capital days improved from 35 to 34 days.

Inventory levels increased by 10.7% and group inventory days were four days higher at 78 days. Retail inventory was impacted by a focus on product availability to drive sales growth and the opening of new stores later in the year.

UPD inventory was higher due to demand-driven buy-ins of GLP-1 product and increased Unicorn stock levels at year-end.

Cash and capital management

Cash generated by operations totalled R6.6 billion (2024: R6.0 billion).

The group’s capital management strategy remains focused on investing in the organic growth of the business and returning surplus funds to shareholders through dividends and share buybacks:

• Capital expenditure of R985 million (2024: R891 million) was reinvested across the group. This included R599 million for new stores, pharmacies and store refurbishments. A further R234 million was invested in information technology (IT) and other retail infrastructure and R152 million on distribution centres (DCs), including the expansion of the Centurion facility.

• The group returned R2.7 billion to shareholders through dividend payments of R1.9 billion and share buybacks of R751 million.

At the financial year-end the group held cash resources of R3.3 billion.

Capital expenditure (R’m)

Cash management (R’m)

Information technology

IT management aims to ensure systems and infrastructure are well maintained, secure and remain relevant to the future needs of the business. During the year the group invested R158 million (2024: R132 million) in computer hardware and R135 million (2024: R111 million) in computer software.

The group continues to focus a major portion of IT investment on replacement software solutions for core systems within Clicks and UPD. The implementation of these best-in-class IT systems continued during 2025 on a risk-mitigated basis.

• UPD’s enterprise resource planning (ERP) system was rolled out to seven bulk distribution clients during the year and the remaining clients will be onboarded by March 2026. The SAP warehouse management system was successfully upgraded.

• The new pharmacy management system is designed to enhance operating efficiencies and drive revenue growth. The implementation has progressed well, with the system installed in 715 pharmacies by year-end. The project remains on track to be completed by the end of calendar year 2025. Following the completion of the project, enhancements will be introduced, including a pharmacy call centre, centralised stock management and courier medication services.

• The warehouse management system for the retail DCs was successfully implemented at the Cape Town DC, with rollout to the Durban and Centurion DCs planned for completion in the new financial year.

• Further investments in the omni-channel e-commerce platform are planned to enhance customer reach through ongoing upgrades and enhancements.

Summary statement of comprehensive income (R’million)

Summary statement of financial position (R’million)

Medium-term targets

Medium-term financial targets

Financial targets are disclosed to guide shareholders on the group’s medium-term performance expectations. These targets are reviewed annually to take account of the group’s current performance and the medium-term outlook for trading.

While all the targets were achieved or exceeded, management will not be revising any of the targets for the year ahead.

Financial plans for 2026

Capital expenditure of R1 256 million is planned for the 2026 financial year, to be utilised as follows:

• R662 million will be invested in the store portfolio, mainly on 40 to 50 new Clicks stores and 40 to 50 new pharmacies. As part of the ongoing store refurbishment programme, 70 to 80 stores will be modernised to remain appealing and relevant to customers.

• R594 million is intended for supply chain, IT and infrastructure. This includes R506 million on retail systems and infrastructure, including the completion of the new pharmacy management system, implementation of the warehouse management system at two DCs and further investment in solar energy. R88 million will be spent on UPD IT systems and warehouse equipment.

Retail trading space is expected to increase by approximately 5.0% in 2026.

Appreciation

Thank you to the investment community for your engagement with management over the past year, and to our local and international shareholders for your continued belief in the group’s investment case. I would like to express my appreciation to our group and divisional finance teams for their dedication and commitment to maintaining high standards of financial reporting.

 

Gordon Traill
Chief financial officer

6 November 2025