Clicks forges ahead with R1bn capex plan

JSE-listed retail-led healthcare group Clicks has reaffirmed its ambitions to plough R958 million into increasing its store and pharmacy footprint, refurbishments and improving supply chain efficiencies, despite consumer disposable income coming under pressure.

The group informed investors of its plan to follow through with the record capital investment plan on Thursday, with the release of its half-year financial performance for the period ending February 2023.

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Listen to Simon Brown speak to Evan Walker from 36ONE Asset Management about the pressures facing the South African consumer:

The billion-rand investment will include a R477 million investment in “new stores and pharmacies and the refurbishment of 45 stores” and a R481 million investment in “supply chain, technology and infrastructure, including battery storage at UPD’s main distribution centre” the group said.

The group says it invested R351 million towards this goal in the first six months of its financial year.

“Clicks plans to open 50 new stores and 40 pharmacies for the financial year and remains committed to its longer-term target of 1 200 stores.

“Management expects trading conditions to remain extremely constrained owing to high levels of inflation placing pressure on consumer disposable income while load shedding will continue to disrupt trading patterns,” the group said.

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Muted performance

The first six months of the retail group’s 2023 financial year were rather muted, with it posting a 1.1% increase in diluted headline earnings per share (Heps), to 472.2 cents this period.

Group turnover – not accounting for vaccinations – increased by 6.8% to R20 billion, while retail turnover increased by 11.9% and distribution turnover declined by 1.8%.

Clicks says the decline in distribution turnover is due to “lost sales opportunities … during the systems implementation, lower demand from independent pharmacies and the shift of products within UPD from the preferred supplier to bulk distribution channel.”

The interim dividend increased just 2.8%, to 185 cents per share.

Adjusted group operating profit increased by 7% to R1.6 billion, while the group’s adjusted operating margin increased by 40 basis points to 8.2% during the period.

CEO Bertina Engelbrecht believes Clicks’s latest performance to be strong, indicating the group’s resilience, despite customers being under financial pressure.

“Growth in Clicks was driven by the sustained post-Covid recovery in the beauty and personal care categories, supported by the Clicks ClubCard loyalty programme which passed the 10 million active member milestone,” Engelbrecht said in the statement.

Clicks share price

Clicks share price

This article originally appeared on Moneyweb and was republished with permission.
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