Clicks plans R700m capital investment
LISTED retail-led group Clicks is planning a capital investment of R700 million across its store and pharmacy network, as well as infrastructure, in the next financial year to support the increased scale of the business.
The group said this was part of its strategy to expand its stores network to 900 in the long term.
Chief executive Vikesh Ramsunder said the group opened 17 stores in the six months to the end of February, to take its total network to 680. He said that the group expected to increase its investments despite the difficult operating conditions.
“We are expecting the trading environment to remain challenging in the second half,” Ramsunder said. “The core health and beauty markets in which we trade, as well as our business model, have proved to be resilient.”
Ramsunder said Clicks increased its share of the retail pharmacy market from 23 to 23.8 percent at the end of February and planned to grow this to 30 percent in the long term.
The group reported double-digit growth of 13.2 percent in diluted headline earnings per share to 300.1 cents a share, driven by strong health and beauty sales. It said the increase came despite an environment of low inflation, subdued economic growth and constrained consumer spending.
Group turnover increased 6.2 percent to R15.3 billion, while retail sales grew 7.7 percent and by 4.5 percent in comparable stores, with selling price inflation of only 1 percent.
Ramsunder said the group planned to open 41 stores in the next financial year, well ahead of its target range of between 25 and 30 stores.
“The online store is the chain’s fastest-growing store, reflecting customers’ need for convenience, as well as the growing trend to online shopping in South Africa. Eighteen new pharmacies were opened to extend the pharmacy network to 528,” Ramsunder said.
Clicks’ distribution turnover shot up 5.1 percent, with price deflation of 0.2 percent during the period.
The group said total income grew by 8.9 percent to R4.3bn, with its total income margin improving by 60 basis points to 27.7 percent.
Clicks increased its interim dividend by 15.1 percent to 118c a share.
Retail health and beauty sales grew 8.5 percent, with good volume growth and market-share gains across most product categories.
“This growth was mainly due to competitive pricing and appealing promotions in the current constrained consumer environment, with promotional sales increasing by 10.3 percent and accounting for 38 percent of the turnover in Clicks,” Ramsunder said.
The group’s pharmaceutical distributor, UPD, increased operating profit by 27.2 percent, and total turnover managed by UPD, which combines wholesale and bulk distribution, grew by 21.9 percent to R10.2bn.
Ramsunder said UPD will benefit from being awarded two new bulk distribution contracts, which commence late in the second half.
Clicks rose 3.99 percent on the JSE yesterday to close at R184.07.