Clicks, which has a footprint of 840 stores, has upped its full-year dividend by almost a third after achieving double-digit retail sales growth. A recovery of beauty products supported this as South Africans spent more time outside their homes, and despite "severe headwinds" such as the July 2021 riots and intense load shedding.
The JSE-listed pharmaceutical retailer reported on Thursday that headline earnings rose 32% to R2.55 billion in its year to end-August, also getting a boost as it supported the rollout of Covid-19 vaccinations, lifting turnover by R1.1 billion, as well as an expansion of its store base. It said it was the largest vaccination provider in the private sector, having administered more than 3.5-million doses.
But, while it indicated it was continuing with its expansion strategy, increasing its target to 1 200 stores from 900 over the long term, Clicks also struck a cautious note, saying that trading conditions "will remain extremely constrained owing to the increasing pressures on consumer disposable income in the current low growth, high inflationary environment".
CEO Bertina Engelbrecht said in a statement that the pharmacy group had to contend not only with the effects of the July 2021 civil unrest on retail trading, but also much higher levels of load shedding in the second half of the year and depressed consumer spending.
"The performance for the year highlights the resilience of the group’s business model and the defensiveness of our core retail categories," she said.
The firm, which has upped its dividend 30% to 637c per share, attributed the performance to higher margins, as well as strong cost controls and cash flows.
Group turnover rose 6% to R39.6 billion, while retail sales grew 11.7%, supported by selling price inflation of 4% for continuing operations in its retail business.
The company also reported cash inflows from operations of R4.3 billion, adding that its adjusted operating profit rose 9.2% to R3.3 billion. It also said it returned R1.7 billion to shareholders during the year through share buy-backs and dividend payments.
In terms of expansion plan, the group said the plan was to open 40 to 50 stores and 40 to 50 pharmacies each year, adding that "record capital investment of R936 million is planned for the new financial year".
This included R477 million for new stores and pharmacies and the refurbishment of 60 stores. A total of R459 million would be invested in supply chain, technology and infrastructure.
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Clicks said its wholesale pharmacy division United Pharmaceutical Distributors' total managed turnover increased 7.6% to R30.6 billion.
Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said the group’s turnover growth in the second half looked low, adding that only time would tell if the company would "balance the effect of less vaccinations versus more customers through the door for normal sales".
Treurnicht said "blackouts aren’t helping", adding the consumer was "definitely slowing down and inflation is on the rise".
"We see price investment or in simpler terms margin absorption by retailers everywhere, meaning stores are fighting for market share."
He said while Clicks had ambitious growth plans, there was also an evident skills shortage in terms of pharmacists. Treurnicht said at current valuations, he regards Clicks, which has a share price of R277.24, as "expensive".
In morning trade on Thursday, the firm's shares had jumped 7.31% to R297.51, having risen by just less than this on a one year basis, and valuing it at R67.64 billion on the JSE.