Clicks is an iconic brand in SA, straddling the pharmaceutical and general merchandising areas of retailing, as well as pharmaceutical distribution.
The company has been around since the mid-1960s, rarely disappointing its shareholders, and the equity market has rewarded it with the second-highest rating of any JSE-listed retailer after Dis-Chem.
It has stuck to a tried and tested formula of offering a decent range of pharmaceutical and related products at reasonable prices, coupled with an extensive range of small electrical and electronic goods and other general merchandise.
It is to SA what Boots and Superdrug are to the UK and what Walgreen is to the US. And like its British and US counterparts, Clicks survived the onslaught from supermarkets, which threatened to usurp its turf over the years but instead managed to coexist.
Clicks’s interim results to end-February 2022 highlight why the market still regards the group so highly.
Consistency is the hallmark of its results. While the group has rarely if ever managed to shoot the lights out, it has usually exhibited sustained and solid earnings and dividend growth, without any nasty surprises along the way.
The only exception to this was in the early part of the millennium when the group lost its way under then CEO Trevor Honeysett, who had taken to referring to himself as “Group Leader” in the dying days of his reign. But after a swift change of management under David Kneale, Clicks was soon back on track again.
Clicks has had only six CEOs since Jack Goldin founded it in 1967. After Goldin came June Kritzinger, who guided the group brilliantly through the 1980s and early 1990s when female CEOs/MDs of companies in SA were a relative rarity.
Kritzinger handed over to Honeysett, who oversaw the period when pharmaceutical retailing was deregulated in SA. He became obsessed with that aspect of the business to the detriment of everything else at Clicks. By 2005, the group was floundering.
David Kneale, brought in from Boots in the UK, had the unenviable task of getting Clicks back to basics. But that is precisely what he did, and relatively quickly too. Kneale retired in January 2019 and handed over to Vikesh Ramsunder, who emigrated to Australia last year.
The new CEO, Bertine Engelbrecht, has been at Clicks for many years and was part of Kneale’s turnaround team from 2005 onwards. She has big boots to fill, but is superbly equipped to do so.
For the six months to end-February 2022, group turnover rose 9% to R19.6bn while gross profit rose 11.7% to R41bn. Retail sales grew 13.6% with selling price inflation of 3.7%. Like-for-like retail sales growth was 10.2%. The total retail footprint was increased to 799 stores, with 39 new stores added in the past year while the number of retail pharmacies increased by 45, bringing the total to 646.
The pharmaceutical distribution operation, UPD, saw its managed turnover increase 6.7% to R14.2bn. But wholesale turnover dropped 3.6%, due mainly to lower sales to private hospitals and independent pharmacies during the less severe fourth wave of the Sars-CoV-2 pandemic.
Diluted headline earnings per share (heps) rose 26% to 466.9c and a dividend of 180c per share was declared, an increase of 26.3% on the previous interim period.
Forty-five new Clicks stores will be opened in the financial year to end-August 2022, and management has guided for diluted heps growth in continuing operations of 25% to 30%. This should result in diluted heps of about 1,000c for the year to August 2022, placing the share on a price:earnings ratio of 31.1 times at a share price of 31,082c. While very high, it’s a lot lower than the historic PE ratio of 39 times. A few more years of strong earnings growth are required to bring the PE ratio down to more reasonable levels.
• Gilmour is an independent investment analyst with Salmour Research.
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