Business

Clicks boosts profit – and plans to open 50 new stores

Luke Fraser

 ·25 Apr 2024

Clicks recorded a 13.5% jump in operating profit in its latest interim results and plans to open over 50 new stores in the current financial year.

However, the group has also flagged the challenging operating environment in South Africa as a risk, which includes fears over ‘disruptions’ during the upcoming national election.

In the group’s interim results for the six months ended 29 February 2024 (H1 2024), it said that it was able to gain market share in health and beauty categories, grew private label products, strengthened
margins generated robust cash flows and improved returns to shareholders.

The group’s profit growth was primarily driven by higher demand in the beauty and personal care categories, with growth also supported by the Clicks ClubCard loyalty programme growing by 1 million users in the past year to 11 million active members.

Clicks also expanded its retail footprint to 902 stores, opening a net 41 new stores over the last year.

“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,” said the group.

Looking at the group’s financial performance, turnover increased by 9.0% to R21.8 billion.

Total income also grew by 14.1% to R6.6 billion.

That said, retail costs also grew by 14.8%, primarily due to higher depreciation charges, lease liabilities, provisions for employee incentives, advertising and electricity costs. The three acquisitions also added 3.0% to cost growth.

The group’s overall operating profit, however, increased by 13.5% to R1.9 billion, while the group’s operating margin jumped by 30 basis points to 8.5%.

Headline earnings jumped by 10.5% to R1.3 billion, with headline and diluted headline earnings per share jumping by 13.0% to 534 cents, while earnings per share jumped by 13.0% to 533 cents.

The group also declared an interim gross ordinary dividend of 210.0 cents per share (2023: 185.0 cents per share).

“Cash generated from operating activities before dividends paid totalled R1.1 billion. Capital expenditure of R314 million was reinvested mainly in new stores and pharmacies, store refurbishments, supply chain and information technology.”

“The group has invested R36 million in renewable energy solutions, including the recent installation of additional solar panels and battery storage at the head office and UPD’s main distribution centre. At end February 2024, the group held cash resources of R853 million.”

Outlook

The group said that consumer spending will remain contained due to inflationary cost pressures, while potential disruptions ahead caused by the May national election and the resumption of load shedding pose risks to the trading environment.

The group plans to open another 50 to 55 stores during the 2024 financial year, with a further 10-12 pharmacies planned to open.

“Capital investment of R920 million is planned for the full financial year. This includes R514 million for new stores and pharmacies, and store refurbishments. A further R406 million will be invested in supply chain, technology and infrastructure, including the ongoing investment in renewable energy solutions.”

The group’s directors forecast diluted headline earnings per share will end the financial year ending 31 August 2024 and will increase by between 10% and 15% for the prior financial year.

“This forecast is based on the assumptions that the trading environment will remain constrained in the second half of the 2024 financial year, with continued high levels of consumer inflation, uncertainty ahead of the general election in May, ongoing electricity load shedding and no changes in the regulatory environment.”

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