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Clicks reports resilient first-half as earnings rise 13%

| Retailer trading results

By Jacqueline Mackenzie - Business Live

The group expects full-year Heps to increase by between 10% and 15%

Health and beauty retailer Clicks grew earnings 13% at the halfway stage amid strong turnover and profit growth in a tough trading environment.

Group turnover for the six months ended February increased 9% to R21.8bn while retail turnover, which includes Clicks, GNC, The Body Shop and Sorbet corporate stores, increased by 12.4%, the group said in a statement on Thursday.

Distribution turnover growth of 1.3% was affected by the systems implementation at the main UPD distribution centre.

Total income grew 14.1% to R6.6bn, with headline earnings per share rising 13% to 534c.

Group operating profit increased by 13.5% to R1.9bn and the operating margin increased by 30 basis points to 8.5%. Profit for the period was 10.4% higher at R1.27bn. 

An interim dividend of 210c per share was proposed.

The group attributed the performance to its resilience in overcoming mounting headwinds in the trading environment. It gained market share across the retail health and beauty categories, grew private label products, strengthened margins, and generated robust cash flows, it said. 

Profit growth was driven primarily by higher demand in the beauty and personal care categories, supported by the Clicks ClubCard loyalty programme which has grown to 11-million active members, gaining 1-million new members in the past year.

Clicks opened its 900th store in February as the brand expanded its retail footprint to 902 stores with the opening of a net 41 new stores in the past year. A further 27 pharmacies were opened, extending the national pharmacy presence to 718.

The acquisitions of Sorbet, M-Kem and software development company 180 Degrees, which were completed in the previous financial year, have been successfully integrated into the group's operations and are performing ahead of pre-acquisition expectations, it said.

“UPD is now positioned for growth following the completion of the large- scale systems implementation early in the reporting period and to benefit from the higher increase in the regulated single exit price (SEP) of medicines relative to the prior year,” Clicks said.

UPD’s stated strategy of rationalising its bulk distribution portfolio to focus on profitable clients has adversely affected turnover through the non-renewal of two contracts. The strategy is, however, expected to benefit margin and support the acquisition of profitable new clients.

The group’s retail margin expanded by 60 basis points due to the strong growth in higher margin private label products, the good performance of the beauty category and Sorbet franchise fees, it said.

The group returned R2bn to shareholders in dividend payments and share buybacks in the six months. Since 2006, the group has returned R19.1bn to shareholders in dividends and buybacks.

Clicks expects consumer spending to remain constrained due to inflationary cost pressures while potential disruption ahead of the general election in May and the resumption of load-shedding pose risks to the trading environment.

The group plans to open 50-55 stores for the 2024 financial year and remains committed to its longer-term target of 1,200 stores. It plans to open a further 10-20 pharmacies.

UPD is expected to deliver a stronger second half as the wholesaler continues to improve performance after the recent systems implementation and benefits further from the higher SEP increase.

Capital investment of R920m is planned for the full financial year. This includes R514m for new stores and pharmacies, and store refurbishments, while a further R406m will be invested in supply chain, technology and infrastructure, including the ongoing investment in renewable energy solutions.

The group expects full-year diluted Heps to increase by between 10% and 15%.

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