Battle of pharmacy giants
With Dis-chem’s listing in 2016, investors have a tough call to make between the rivals in the health and beauty sector
Reliably consistent growth in good and bad times, high returns and strong cash flow are usually the three essential attributes sought by long-term investors.
Clicks Group has been delivering them to its shareholders for over a decade.
“Clicks just keeps on powering ahead,” says Nadim Mohamed of First Avenue Investment Management.
“Its management have done a superb job.” Clicks, which celebrates its 50th anniversary this year, kept up the pace in its half-year to February, turning in a 12.2% rise in operating profit to R942m, a 14.8% rise in headline EPS (HEPS) and a 16.5% rise in its interim dividend. Adding to the solid showing was an impressive 39.3% return on equity and cash flow after tax of R890m.
We are aiming to have 900 Clicks stores, all with pharmacies, within the next seven to 10 years David Kneale
As always, health and beauty products were the big drivers of Clicks’s growth in its past half-year. Here Clicks excelled, lifting sales by 14.3% to an estimated R9.5bn.
“We achieved the health and beauty sales growth despite internal inflation of only 2.6%,” says David Kneale, Clicks CEO since 2006. “On a same-store basis sales we’re up 8% and we gained market share in all categories.”
Growth was heavily driven by promotions, which registered a 23.5% increase in sales and accounted for 37.6% of sales. “Consumers are looking for value,” says Kneale.
Clicks’s sales performance left it and its close rival, Dis-chem, running neck and neck. In its half-year to August, the then 118 primarily largeformat store Dis-chem achieved a 15% rise in retail sales to R8.78bn and an 8.6% rise in same-store sales.
From a retail operating profit perspective, in their latest half-year Clicks’s R793m put it