There’s room for two, says Clicks of Dis-Chem listing
Clicks Group has downplayed any concern regarding the imminent initial public offering (IPO) of smaller rival Dis-Chem on the JSE, saying there was room for more than one player in the listed pharmaceutical space.
With about 89 dispensaries across the country, privately owned retail pharmacy Dis-Chem has been pitching itself to potential investors, and has appointed advisers to take it through the IPO process.
"There is space for two players (in SA). If you look at the US, there’s Walgreens and CVS ... Boots and Superdrug in the UK and both Watsons and Manning operate in Asia," Clicks Group CEO David Kneale said on Thursday. The company — which reported a 10.4% rise in full-year profit on Thursday and increased its dividend 23.7% to R2.35 per share — has 486 Clicks stores, with 361 pharmacies.
About 61.7% of its shares in issue are foreign-owned.
Dis-Chem was established in 1978 – the chain is run by original founders, Ivan and Lynette Saltzman, with Regarding Capital Management (RECM) owning a minority share in the group through a private equity company, Fledge.
Dis-Chem has expanded aggressively over the past five years through its typically large-format stores.
Sales at Clicks Group rose 15.3% to R22.1bn. Profit for the year was at R955m.
Operating expenses in retail were 10.1% higher due to the increased investment in stores — which included R35m on power packs to mitigate the effects of load shedding, as well as staff and marketing costs.
Wholesale pharmacy business UPD and The Body Shop again emerged the strongest performers. UPD increased turnover by 21.6% to R10.4bn.
The unit is, however, expected to face a demanding year because of the ongoing margin pressure from the faster growth in generic medicines.
The core Clicks chain continued to push markdowns and specials to drive sales as a moderation in income growth and debt slash consumer spending.
Sales grew 10.9%, and by 7.9% in comparable stores — with inflation of 4.3%.
The Body Shop, which Clicks manages in SA under a franchise arrangement, increased turnover by 12.7% to R167m.
Clicks Group also owns fitness brand GNC and accessories label Claire’s, which have stand-alone stores and a presence in Clicks stores.
Musica’s sales edged up slightly by 2.3%, much of this from gaming and technology. The local CD and DVD market is declining as consumers shift to digital formats.
More than 15% of sales in Musica are now from technology products.
The retail group returned R667m to shareholders through dividend payments of R491m and share buybacks of R176m, it said. Capital expenditure of R432m has been pencilled in for the year ahead.
On Thursday, Clicks Group’s shares rose as much as 11% to an all-time high of R106.
According to Bloomberg, its shares have gained 30% this year, compared with a 5.3% gain in the FTSE/JSE Africa Food and Drug Retailers index.