Earnings up 22% on strong performance from Clicks chain
Release Date: 2011/04/14
Cape Town – Clicks Group, the listed health and beauty retail and supply group, today reported a 22.2% increase in diluted headline earnings per share to 122.2 cents for the six months to February 2011, driven by the strong performance from the Clicks chain and the benefits of the ongoing capital management programme.
Return on equity improved to 55.8% from 46.2% in 2010 and the directors declared an interim distribution of 37 cents per share, an increase of 21.3%.
Chief executive, David Kneale, said the core Clicks business delivered another excellent performance in a retail environment where consumers have remained cautious about spending and are highly value conscious. He said selling price inflation had declined steadily over the period, measuring 2.1% for the six months compared to 8.6% in the prior period.
The group’s retail turnover increased by 13.5% to R5.5 billion, with Clicks stores lifting turnover by 15.8% and growing market share across key merchandise categories. Operating profit in Clicks increased by 23.5%.
Clicks expanded its national pharmacy footprint to 266 following the opening of a further 15 in-store dispensaries. The chain opened 13 new stores to increase the store footprint to 382. Clicks plans to grow its store base to 500 in the next three to five years, with a pharmacy incorporated in each store.
Pharmaceutical distributor, UPD, increased turnover by 7.6% as the market slowed owing to lower inflation and faster growth in sales of lower value generic medicines. UPD has maintained its 23.4% share of the private pharmaceutical market.
Musica’s turnover was 2.5% lower as the CD and DVD markets in the country continued to decline. Gaming and lifestyle merchandise showed good growth. While turnover in The Body Shop was 5.2% down as the brand experienced selling price deflation of 10.0%, unit sales for the period increased by 2.6%.
The group’s operating margin improved by 50 basis points to 6.5%, translating into a 16.5% increase in operating profit to R462 million.
The group remains highly cash generative, with the cash inflow from operations totaling R396 million. Cash was used mainly for capital expenditure of R119 million while R450 million was returned to shareholders in the past six months through a combination of share buybacks and distributions.
Kneale said the group continues to invest in stores, systems and people for sustainable growth. “We introduced a broad-based employee share ownership scheme in February to accelerate transformation and black economic empowerment, as well as to retain and attract scarce and specialist skills. Shares have been allocated to 7 960 employees, including almost 400 pharmacists.”
On the outlook for the second half, Kneale said the trading environment remains challenging. “Selling price inflation is expected to stay low while we face continuing upward pressure on costs.”
“However, the Clicks Group’s focused strategy ensures that our brands remain competitively advantaged, with good organic growth prospects in the health and beauty markets. We expect to increase diluted headline earnings per share by 17% to 22% for the full financial year to 31 August 2011,” he said.