Clicks Group Ltd S/Adr

Good afternoon and a warm welcome to the webcast of our annual results for the year ended 31 August 2025. I am Bettina Engelbrecht, Chief Executive Officer of the CICS Group. Joining me here today is Gordon Trail, our Chief Financial Officer. We will be taking you through the presentation of our annual results and respond to your questions after the conclusion of our presentation. This slide sets out the outline we will follow. I will start with the review of our financial year. Gordon will follow with an overview of our financial results. I will take you through the trading performances of our business units, first CLICS, then UPD. And I will then close with the outlook for the group. Please submit any questions that you may have via the webcast platform during and after the conclusion of our presentation. Sue Hemp from our investor relations team will read out your questions to which Gordon and I will respond. I will now commence with the review of the year. At the macro environment level, green shoots are sprouting, such as a slight expansion of GDP growth, the easing of domestic inflationary pressures, and lower debt servicing costs. Although confidence levels are below historic averages, the latest consumer confidence index reported a modest easing of pessimism. Despite some challenges, particularly the high unemployment rate and fiscal constraints, we maintained performance momentum because of our focused results orientation, resilient business model, brain strength, and incredibly loyal Club Card customers. In the year, we delivered diluted headline earnings per share growth of 14.1%. This is comfortably within our guidance range and an enviable return on equity of 49.2%. We are reaping the benefit of the foresight of past leaders who launched our loyalty program in 1995. In August, Our club card celebrated its 30th anniversary with over 12.6 million active members who contributed 82.6% to our sales. Last year, I said I would be disappointed if we did not exceed our store and pharmacy rollout targets. True to form, our teams did not disappoint. We increased our click store count to 990 pharmacy count to 780, and primary care clinics to 225. We are strengthening our relationship with the Department of Health, a key stakeholder. Post the year end, additional pharmacy licenses are being issued. This supports our pharmacy expansion program. In a subdued trading environment, customers focus on value by switching to lower priced brands, buying on promotion and using loyalty programs. As a value retailer with a respected private level program, we were well positioned to leverage our market leading shares in defensive retail categories. Customers responded favorably to our product and price offers, resulting in market share gains in our core health and beauty categories. I will provide greater detail on the market share and category performances in the retail segments review. UPD has stabilised and the business is gaining positive traction. Purchasing compliance from both clicks and the listed private hospital groups have recovered. Expense management, as Gordon will share in more detail, was exceptional. As a group We embrace inclusive transformation with a strong emphasis on gender diversity and local empowerment, the results of which are reflected in our BBBEE Level 3 rating and our top achiever status in the UN Women's Empowerment Principles. I now hand over to Gordon, who will take you through the group's financial results.

Thank you, Bettina. Good afternoon. As in previous years, we will cover the financial performance of the group, starting with the group highlights. If we consider the financial highlights, group turnover increased by 5.3%. Retail turnover grew 6% for the year, with half-tooth slightly slower due to new stores and pharmacies being opened later in the year and lower inflation. UPD had a slower second half, after the recovery from the system implementation in the previous year. Total income margin grew by 90 basis points, resulting from strong growth in private label, supply chain efficiency income and lower shrink in retail business. The group trading margin at 9.8% increased by 60 basis points due to the growth of retail and good cost control from UPD. Diluted headline earnings per share for the group increased to R13.62 per share, up 14.1% in last year, within our guided range of 11% to 16%. The group's operations generated strong cash inflows of £6.6 billion. During the year, we returned over £2.7 billion to shareholders in dividends and share buybacks. The group's return on equity at 49.2% increased from 46.4 per cent in the prior year, and the dividend declared for the year has been increased by 14.2 per cent to £0.886 per share, which is a 65 per cent payout ratio. Retail had a slower second half due to the later opening of stores and pharmacies, inflation remaining muted and a slower flu season. UPD's compliance levels in both its main channels continued improving, resulting in good growth in sales to clicks, while positive growth was maintained in the hospital channel. If we exclude the unicorn disposal in the prior year, retail grew 7%, with same stores growing 4.7%, excluding the additional trading day in the prior year. New stores and pharmacies added 2.3% to the top line. while selling price inflation averaged 2.6% from the year, lower in the second half. The distribution business had a consistent performance in the second half, with good compliance from its major sales channels. The business grew despite continuing genericisation in the hospital channel and low inflation. Bettina will cover the details of each business's performance later in the presentation. This slide reflects our total income earned, which has increased by 8.4% for the year. You can see the total income margin in retail was 70 basis points higher than last year, as there was good growth across pharmacy, health and beauty and personal care, driven by private label. In addition, the previous investments in systems has allowed us to generate additional supply chain efficiency income. UPD's total income margin was down 10 basis points to 9.9%, and this was due to the higher SEP increase granted in the previous year. Overall, the faster growth of the retail business at 8.1% and the growth in UPD has resulted in the group's total income margin being 90 basis points higher than last year. Retail costs grew 7.9%, which was lower than in the first half, and remained well controlled. In the second half, cost growth was 7.3%. Store staff bonuses have increased by 9%, which is on top of a 21% increase in the prior year and is well deserved based on this year's performance. In the year, we have added a net 55 click stores and a net 60 pharmacies. We are looking forward to continue accelerating our pharmacy growth in the next financial year. We would also like to thank the Department of Health for their support in the last year in working with us to close the gap in stores without pharmacies. Comparable retail cost growth, excluding new stores, was up 5% per year, with costs growing at a lower rate in the second half. The IFRS 16 interest charge increased as a result of the increasing number of renewals in the period. The growth has slowed from the prior year. UPD's costs have grown lower than turnover as the system's implementation was completed and efficiencies have been extracted. It is pleasing to note that costs grew 1.6% in the first half and 2.2% in the second half. Employment costs in the second half continued to be well controlled, although we're ahead of the first half due to the provision of performance bonuses. Other costs fell by 3.9% in the second half, as a result of good cost control and lower debtor provisions required. The investments in solar have paid off, with electricity, water and generator costs for the year declining by 35% despite the higher electricity tariffs. Our investment in electric vehicles has resulted in further efficiencies, with transport costs down 0.2% year on year. Further investments are being made to allow delivery with electric vehicles, which will come through in our financial year 2026. This further supports reducing our carbon footprint. Retail grew trade and profit by 8.4% with the margin improving by 30 basis points to 10.5%. This has been due to good sales growth, strong other income generation together with efficient cost management. UPD's trade and profit increased by 9% with the trading margin increasing by 10 basis points to 3.3%. This was due to consistent sales growth and good cost control. Overall, the group's trading profit increased by 12.1% to 4.7 billion for the year. This slide reflects the growth in turnover, trading profit, and margin of the group over the past five years. The company has sustainably grown its performance through various economic cycles. And to note that in the last year, inflation has moderated, interest rates have reduced, and we have all benefited from the lack of load shedding in the past year. There are some concerns, though, with the impact of external tariffs further straining the economy. That said, the group has demonstrated its ability to continue to evolve the trading margin over the past five years. Inventory levels for the group have increased by four days to 78 days. Retail stock days are one day higher than last year, and inventory remains well controlled, although increased due to the later opening of new stores in the year and higher levels of inventory being held ahead of the warehouse management system going live in Cape Town. UPD stock days at 45 days are three days higher than last year, partially due to higher levels of GLP-1 buy-ins and unicorn stock held year end. Overall, working capital was well managed, with net working capital days at 34 days. This slide shows the movement of cash during the year. As you can see, we started the year with cash of 2.7 billion, reflected in dark blue on the left-hand side, and ended the year with 3.3 billion on the right-hand side of the slide. The group has generated cash of 6.5 billion, highlighted in green, working capital inflows of £73 million, repayment of lease liabilities amounting to £1.1 billion and tax payments of £1.2 billion. £985 million was reinvested in capital expenditure across the group. Of this amount, £599 million was invested in new stores as well as click store refurbishments. 152 million was spent on distribution centres, including the expansion of our Centurion DC. And 234 million was spent on IT and other retail infrastructure. We returned 2.7 billion to shareholders this year. This was in the form of dividends of over 1.9 billion and share buybacks of 751 million. Final cash dividend of 1.5 billion will be paid out to shareholders in January. This slide shows our commitment to a disciplined approach to capital allocation. We expect to continue to invest in the business and return capital to our shareholders through dividends. Over and above this, our preference is to return any excess cash through share buybacks, which is demonstrated in this graph. Since 2006, we have bought back 164 million shares at a cost of 7.8 billion. At the closing share price on 31 August 2025, the value of these shares will amount to £61.2 billion. CapEx of over £1.2 billion is planned for the year ahead. £662 million will be invested in our store and pharmacy network. This will include 40 to 50 new click stores and pharmacies and 70 to 80 retail store refurbishments. £594 million will be spent on IT systems and infrastructure. £88 million of this amount will be invested in UPD IT and warehouse equipment and we will invest the balance of £506 million in retail IT systems and infrastructure. This will include the completion of our new pharmacy management system and roll out of the implementation of the new warehouse management systems to our two other DCs and further investment in solar. We will continue to grow and invest in a retail footprint. UKD is positioned for growth now that the implementation has been completed, and we will continue investment in systems for pharmacy and our distribution centres in the retail business. This slide reflects our medium-term financial targets. We have made good progress against these. Importantly, the group has continuing headroom for growth particularly in expanding the retail store base. While we are showing good progress, these targets will not be revised at this stage. As indicated earlier, we have increased our investment in the business for growth. In framing these medium-term targets, we continue to seek to optimise the balance sheet, improve working capital efficiency, enhance cash returns to shareholders, and maintain the dividend payout ratio between 60% and 65%. This slide demonstrates how the group has sustained its financial performance over the past decade. This is reflected in the 10-year compound annual growth rates achieved in diluted headlight earnings per share of 13.5% per annum and dividend per share growth of 14.2% per annum. The compound annual total shareholder return over the past 10 years equates to 17.3% per annum. These excellent growth rates have been driven by strong organic growth, particularly in our health and beauty business, which has been supported by an efficient supply chain. This has in turn translated into strong cash returns, which have not only been reinvested in the business, but also allowed us to progressively increase our dividend. This graph shows the group's share price performance over the last 10 years. This performance is all the more pleasing when compared to the return on the Food and Drug Breed Tailors Index of 4.6% and the Top 40 Index of 7.8%. This performance is testament to the hard work of all our employees throughout the group. Earlier, I noted that bonuses for employees have again increased. It is pleasing to note that our long-term shareholders have also benefited. I will now hand over to Bekina to cover the trading performance.

Thank you so much, Gordon. I will now take you through our trading performances, starting with Clicks, followed by UPD. This is the review of the Clicks business. Despite the subdued trading environment and a muted cold and flu season, the retail business delivered a solid result. Existing stores grew sales by 4.7%, excluding the extra trading day in 2024. Inflation slowed down from 6.3% last year to 2.6% this year, and we achieved volume growth of 2.1%. I now turn to the four categories to provide you with greater detail. Pharmacy sales grew 6.9% despite a soft cold and flu season, as well as significant price reductions in key molecules to align with medical scheme formulary compliance requirements. Turnover in our 24-hour unicare format achieved growth of 8%, driven by strong support from doctors, the implementation of our after-hours doctor service, and the exceptional performances of wound care, diabetes, primary care, and IV clinics. Despite the delay in opening new pharmacies, we accelerated in the second half to open a total of 62 new pharmacies for the year, of which 29 were in the last quarter. Clubcard customers contributed over 87% of pharmacy sales, and we continue to be rated as the customer's first choice retail pharmacy. We have increased our primary care clinic count to 225. Clinic sales increased by 10% driven by medical aid funded services and support for our virtual doctor consultation services. Friendship Health and Baby achieved strong growth with value growth of 8% and volume growth of 10.1%. In the baby category, volumes were up 15.3% compared to value growth of 6.2%. Friendship health growth was driven by the extension of our healthcare elevation to 138 stores, exceptional performances in sports and slimming, which was up 27%, and the continuing strong momentum of branded supplements up 29%. Our integrated baby strategy is entrenched in our position as the leader in babies. Despite price deflation driven by supplier-branded diapers and baby foods, as well as supplier infill challenges, this category is continuing to perform well, with private label and exclusive ranges the key to our success. Sales in our standalone Clix baby stores were up 23%. Baby store-in-store sales grew by 12.4%, and online baby sales grew 27%. Sales growth, as you can see, is gaining momentum and we are evolving margin. Sales in our beauty and personal care category was up 7.4%. Despite a heavily competed beauty market and the disappointing performance of the body shop, we grew sales ahead of the market, fueled by new launches and the continued rollout of the elevated beauty wall concept in key nodes. The personal care category delivered a strong performance, up 9.8%, driven by strong private-level sales, which was up 17.6%, strong promotional sales, and innovation in Oh So Heavenly, Being Kind, Dove, and Vaseline product ranges. Our exclusive body freshness range was up 42.6%, driven by exponential growth in spritzes, which was up 44%. In May, the new body shop owners unveiled their post-acquisition turnaround strategy with new product development launches, such as Spa of the World and Passion Fruit. These new ranges are in store and the teams are working to improve the info rate. General merchandise sales performance was disappointing, up just 4.4% due to our underperformance of small household electrical appliances. In the next section, I will provide you with more detail. Despite the increasingly competitive environment, we are continuing to extend our market shares in core beauty and beauty retail categories. Let me take you through these, starting with health. It is a relief to report that our intentional efforts at engaging collaboratively with the Department of Health to advance our public health agenda of improving the accessibility and affordability of healthcare is delivering results. We opened 62 new pharmacies in the year. Although 29 pharmacies only opened in July and August, we gained market share of 20 basis points, creating positive momentum for our new financial year. Friendship health declined by 30 basis points, despite strong gains across sports and swimming up 140 basis points First aid up 290 basis points and incontinence up 100 basis points. Our comprehensive baby execution, which integrates our private label and online offering, convenient locations, competitive pricing, and baby club card benefit strategy drove our market share gain of 80 basis points in baby. Exceptional gains were recorded in diapers up 110 basis points, baby wet wipes up 270 basis points, and baby dry foods up 230 basis points. Pleasingly, we have identified even more opportunities to grow our share of baby. We continue to gain market share in beauty and personal care. Skincare gained another 20 basis points, fueled by strong share gains in face wash, lip care, and moist wipes. and we defended our market-leading share in hair care. Personal care continues to gain market share, up 60 basis points across every measurement period, with strong gains in body freshness, sanpro, and sun care. In general merchandise, we declined by 40 basis points in our legacy category of small household appliances. This was due to significant out-of-stocks in the first half, and an oversupply in the market. What is encouraging, though, is that over the last quarter, we were once again regaining market share. I now turn to the key drivers that support our growth, starting with value. Our brand position of feel good, pay less, supported by generous club card rewards, extensive private label and exclusive ranges, and convenient locations resonated with consumers. Despite heightened competition, we stayed true to our legacy as a value retailer with great everyday pricing and promotions. In so doing, we maintained our competitive pricing against all major retailers on a volume weighted price index that excludes our three for two promotions, bulk offers and club card cashbacks. We grew promotional sales by 12.4% to account for 47% of turnover across all front-shop categories. We are committed to delivering on our public healthcare agenda of extending access to affordable healthcare for all. The convenience of our pharmacy and clinic network, virtual doctor offering, and partnerships with healthcare funders enable us to deliver on our agenda in the year Generics grew by 8.8%, accounting for 59% of sales by value and 71% of sales by volume. Cash rewards are relevant, especially in a tough economic environment. During the year, and with the support of our affinity partners, we returned R855 million to loyal customers in the form of cash back rewards. Our differentiation strategy is premised on responding to changes in consumer demographics, preferences, and shopping behaviors within the context of the trading environment we face. Our private label and exclusive ranges are core to offering the consumer choice. Private label and exclusive brands delivered sales of 9.7 billion rand as it continues its momentum of growing sales ahead of total retail sales. Customers trust our private label brands because of their proven quality and price positioning. This year, one in every three products sold in our front shop was a private label or exclusive product. Private label and exclusives contributed 25.9% to total sales, 30.6% to front shop, and 12.3% to pharmacy sales. Our private label and commercial teams drive innovation and quality, in addition to supporting our sustainability and local empowerment goals. In the year, six of the private label products won SA Product of the Year in their respective categories. Sales in our six standalone baby stores grew 23.7%. We increased our Clicks Baby store-in-store executions from five last year to 14 this year. This is what enabled our gains in baby market share as we also improved margins in this category. The execution of our elevated beauty halls, which is now in 44 stores, is driving increased sales in the big beauty brands and in brands exclusively available in kegs. Our affinity partnership with and equity investment in the ARC, a retail brand focused on the premium beauty market, enables us to extend our access to the premium beauty customer. In this month, Arc opened the largest beauty store in Africa at Sandton City to greater claims. This year, we are celebrating the 30th anniversary of the Clique's Club Card loyalty program. The nostalgic reflections of loyal customers who shared their Club Card journey with us and on their social media platforms fill us with pride. 30 years on, we are still growing with an active Club Card membership base that increased to 12.6 million this year. The contribution of Club Card members to total sales increased to 82.6%, accounting for 80.7% of front shop and 87.4% of pharmacy sales. The 2025 Truth and Brand Map Loyalty White Paper confirmed to the Clubcard program as the most used loyalty program in South Africa. It continues to provide us with a mechanism to attract, engage, and retain customers through personalized experiences that reinforce emotional affiliation to our brand. The use of advanced analytics to drive focused customer segmentation and tailored personalized rewards is critical the success of the club card loyalty program this is an area that requires targeted investment in technological enablement as well as in the correct skill sets although online sales grew by 15.9 we can and we will do better pharmacy is a key driver of our sustained performance by november we will have completed the national deployment phase of our lead pharmacy management system. We can now leverage the system to enhance service levels and increase sales. The expansion of our store network is progressing well and we are accelerating our pharmacy and clinic rollout program because of its proven positive impact on front shop growth. We have invested in people and improved processes to support our growth aspirations. We ended the year on 990 click stores, one Unicare specialized 24-hour pharmacy store, 780 clicks pharmacies, and 225 primary care clinics. We remain committed to delivering affordable, accessible healthcare. 53.2% of the South African population live within a five kilometre radius of a Clicks pharmacy. We have increased our primary care clinics to 225. These are profitable due to medical aid funded services such as diabetes and the extension of our virtual doctor consultations. Now that mChem has been integrated and the rebranding of the Unicare concept approved, we will be extending our specialised 24-hour unicare format by two greenfield sites and two acquisitions by February of next year. As with property, we have invested in the skills required to accelerate the growth of this format and we are accelerating our presence in lower income areas with 247 of our stores located in such areas contributing 23.7% of turnover. That completes the review of the Clicks business. I will now turn to UPD's trading performance. UPD's fine wholesale turnover, which excludes bulk distribution and preferred supplier contracts, was up 5.2%, despite a subdued colds and flu season and lower inflation. a pleasing improvement against last year's negative 0.5% performance. This performance is attributable to greatly improved service levels, which has always been a core UPD strength. All operational service metrics are being met, and the investments we make in systems, people, and processes are bearing results. I will briefly turn to the core customers in this channel. As UPD's largest customer, Clix contributed 58.4% of turnover. Sales to Clix Pharmacy grew by 9.5% as purchasing compliance improved to over 98%. Clix is growing ahead of the market and is accelerating its new pharmacy openings and importantly, actively driving purchasing compliance. This will greatly benefit UPD. Sales to the private hospital channel, which contributed 36.2% of turnover, grew by just 1.4% despite improved purchasing compliance. Volumes, though, were up 8.8% due to increasing generalization and growth in the non-listed acute hospital space. The continued decline of sales to independent pharmacies and other smaller channels is eroding UBD's market share which is down to 26.2%. The improved purchasing compliance from both clicks and the private hospitals, as well as the stabilization of UPD's operational and service metrics, will sustain its performance. UPD's total managed turnover, which includes fine wholesale sales, as well as turnover managed on behalf of bulk distribution clients, was up 2% to 30.5 billion rand. In the prior year, UPD's total managed turnover was down 6.7%, so this is a good turnaround. The growing contribution of generics, now 75.7% of volume, versus 68.8% last year, coupled with lower price inflation, had a deflationary impact on turnover. The UPD team focused on improving quality and service levels, and invested in its key account management principles to drive sales. During the year, UPD stock levels were elevated to improve stock availability for retail pharmacy and hospital formulary lines, and to also improve access to GLP-1 medicines for its customers. Determination of excess property leases has been completed. We have, as Gordon pointed out, extracted the surplus costs carried during the wholesale systems rollout and we have now also implemented more effective time management practices to reduce variable employment costs. The UPD team achieved excellent cost management and a low growth of just 1.9% aided by its early investments in solar, batteries and electric vehicles. The wholesale systems implementation is complete. On the bulk side, the new systems have been rolled out to seven distribution clients, with a rollout to the remaining distribution clients on track to be completed by March next year. In support of our commitment to a sustainable carbon neutral future, we are in the process of ordering another 40 electric vehicles for use nationally.

This completes the review of our trading performance for the year.

It was a challenging year. Despite positive shifts in macroeconomic indicators, the early promise of an improved trading environment did not fully materialize. The resilience of our business model and our teams was tested. I'm incredibly proud of our performance. It was forged by teams with an unrelenting focus on excellence. In retail, the teams delivered superior income growth and margin expansion, coupled with truly outstanding shrink and wastage results. The continued growth of private label and exclusive ranges inspires confidence, and the contribution of Clubcard to turnover is positive. Our new stores, pharmacies, and clinic openings, as well as the record number of store revamps, exceeded expectations. Bongyuen Thule has inherited a healthy business from Bikash Singh. I'm confident that she will lead the team to even greater success. Koreha Mongoshe and the new Rest of Africa team delivered a stellar performance with sales growth in every territory exceeding target due to strong delivery of the operational and customer service metrics. I'm going to call out Corne Fisser and the Namibia team in particular who delivered a consistent exceptional performance. The UPD's team performance in the second half of the year was outstanding. The operational and customer service metrics are aligned to our goals and the work that Trevor McCoy and the team have put into improving the business has created positive momentum for the new financial year. Our group services team under the leadership of my A colleague here, Gordon Trail, has been instrumental on delivering and may even say getting very, very close to the upper end of our medium-term financial targets. The IT team under his control has partnered well with the business to progress our IT investments. We still have so many opportunities to increase our scale, to leverage our loyalty and strengthen customer loyalty. to extend our private level offer, to extract efficiencies, and to improve on our digitization. What matters most is our people, especially our store, pharmacy teams, and our DC teams. Last night, we were privileged to have our top 10 store managers and our top 10 pharmacy managers, as well as our CLICS and UPD DC general managers join our senior leadership team as we took our teams to our results. after close of the market. This provided them with the opportunity to represent their teams and for us to publicly recognize their contributions. In presenting our results here today, Gordon and I acknowledge that we do so on behalf of our people. From our board and executive teams to all of our people and the extended families, thank you. I'll now conclude our presentation with the outlook. Although the macroeconomic indicators are improving, the consumer remains constrained. The consumer is therefore prioritizing value, convenience, and rewards from companies that inspire trust. Our retail strategic pillars of value, convenience, and differentiation, supported by our private label and exclusive program, and Club Cardiology program, is aligned to the consumer needs and positions us for sustained growth. In distribution, our strategic pillars of quality, efficiency, and customer excellence is fundamental to profitable growth. We remain well positioned to thrive in this environment due to our competitive advantage in defensive health and beauty sectors, our growing market leading shares in core retail categories, and in pharmaceutical wholesale and distribution, our sustained long-term growth opportunities underpinned by our value proposition and customer service, and our increasing scale, which enables us to maximize efficiencies and leverage it for effective execution and reach. Over the past five years, we invested in systems in both retail and distribution for growth. We have invested in Leap, a modern pharmacy management system to fuel our pharmacy growth. We invested in infrastructure and in the expansion of our store, pharmacy and clinic network to support growth. And we invested in adjacencies in health and beauty to extend our access to market segments in which we are under indexed. We are now poised to fully leverage these investments made to improve service and increase sales in our network. In the 2026 financial year, we will increase the number of Unicare 24-hour specialized pharmacy stores to a total of five. The Sorbet and our customers are our most profitable Clubcard customers, and increasingly, we still have opportunity to increase club card penetration in these businesses. Our first Sorbet master franchises for Botswana and Mauritius will be concluded in 2026 and we are on track to extend the number of Sorbet stores in South Africa. We will deliver on our medium term target of 1,200 click stores in 2026 we will open another 40 to 50 stores and 40 to 50 pharmacies. And over the medium term, we will open 10 to 15 Unicare stores. Our private label and exclusive program is core to our offering, and we are driving towards our goal of achieving a 35% contribution to our front-shop sales. The objectives outlined above require investment, which will be supported by our planned capex spend of 1.3 billion grand per annum over the medium term. The increasing scale of the business and requirement to plan for succession necessitated a review of our executive structure. In September, the group executive was expanded to six members to drive focus, create capacity for growth, invest in core capabilities and to prepare for succession in our usual disciplined manner the expanded group executive portfolios in addition to the ceo and cfo covers retail south africa rest of africa retail upd our investments in health and beauty and people the complementary diversity profile broad sector experience and track record of performance of the expanded group executive team significantly strengthens our leadership capability. Earlier, Gordon shared with you our pleasing performance against our medium-term targets. No wonder I remain confident of the group's capability to continue to delight shareholders by delivering on our medium-term targets. Thank you so much for listening. I will now hand over to Suhien who will assist us with taking your questions.

Thank you, Bettina. The first set of questions I have come from Michael Jacks at Bank of America. Hi, Bettina and Gordon. Congrats on the solid results and thanks for taking my questions. I have three. One, can you please elaborate a little more on the LEAP system implementation, expected benefits, and whether it is a differentiated clicks or UPD versus peers?

I can take that one. So first of all, Michael, thank you very much for the message that you've sent us. Let's talk a little bit. By November, we will have completed the rollout of LEAP to all of our pharmacies. In my notes, what I said is now the next step for us post-deployment is to really utilize the system in order for us to improve service levels and, of course, as well, to increase sales. How will we do that? It's to ensure that the pharmacist We're now consulting with the customer, has the opportunity to now also talk about expanded services, first of all, within our network, but importantly, some of the complementary medicines that the patient ought to be taking. You know, when we take an antibiotic, ideally we should be taking a probiotic as well. So that's what we mean in terms of the expanded benefits. We are, of course, also, because of a quicker ability to service the customer much more quicker, what it means is the pharmacist has more time to consult the with a patient that is standing right there with them. Differentiation. All of the pharmacy management systems were built at a time when there was no corporate retail pharmacy. And so what we have done is to acknowledge that retail pharmacy is the bedrock of our performance. And so what we have done is really ensured that we've got a modern system, which no one else has, that will create for us an incredible advantage going forward. The process to develop a modern pharmacy management system will take years. Gordon, I'm not sure if you wanted to add anything.

The only other point is probably the last point regarding does it give us a differentiation? Well, bottom line is it does give us a differentiation because there is no other system in the market just now that is modern and web-based, and our competitors are going to have to find something that they can use.

His second question, market share trends are positive in many categories, but you've lost some share in general merchandise. Has this been to online or offline competition?

The way that we look at the competitor is every competitor, not only in South Africa in terms of bricks and mortar, but every online player within South Africa and every online player globally. That's really our competitor set. I said it was because we had significant out of stocks in the first half of the year, and there was a glut of supply in the market itself. And really what we have to take is we look at all of these opportunities to say, you know, where can we do better? And I would say we didn't do good enough. And so now we are poised to really focus on that in our usual manner. And as I've noted, in the last quarter of the year, we were once again regaining market share. in that legacy category of ours.

I will not give up on it. Yes, third question. You mentioned earlier in the year that you were accelerating on e-commerce. The online store and app looks great, but delivery options and lead times are still limited. What are you doing to address this?

So I think we recognise that we can do better in this area. So over the next 12 months, then we are going to be replatforming our online system, both on the app and the web. And that's going to allow us further delivery options. But not only that, a lot of other functionality that we're going to be able to roll out. So I think that as we watch this space in 12 to 18 months, we should be in a very different position.

Another set of questions from Michael Dunabrigat of your Capital Markets. Good day. Thank you for letting us ask questions and well done on the great set of results. first question on the beauty and care segment growth is moderated yet clicks has maintained market share despite increased competition and accelerated rollouts from peers would you please elaborate on how you see the competitive landscape evolving and where you view growth to come from in this category well let me talk about the market in terms of three segments first of all thank you very much uh michael for the comment

The market really is in three sectors. The first is the super high Alison customer, which is super protected against any of the economic indicators in the country. And you see that really in the performance of Arc. Now, that's the reason five years ago, we took an investment decision to invest in Arc. And so we've got that exposure to that premium beauty customer. And the way in which it works, our customer comes and redeems the cash back rewards within a click store. We, of course, play very, very solidly within the middle end of the market. And then the things that we have done is, of course, we use our club card program. And of course, what we do is as well, we've got private level exclusive brands, you know, and so that I think is great. We have. To grow our market share, we have specifically elevated our execution in beauty, and that's the 44 elevated beauty halls that I speak about. And we have seen incredible growth in those stores. We are learning from what we've done there, and we are improving even more. Our performance in market share and skincare is not by accident. It is because of the way in which we have changed the customer journey by bringing skincare much more to the front of the store itself. And then there's the lower end of the market. Now, Interestingly, we have got a private label, a brand actually at the lower end of the market called Smudge, which in the SA product of the year actually won the SA product of the year award, two actually of the awards. So I think great opportunity for us there. But yes, heavily competed. And that's the reason why the way in which we are preferring to, if you will, respond to the changes in the market and competitive activity is to really stratify the market into these three broad sectors and to ensure that we are acting in order to respond to the needs of every one of those segments.

The second question, could you please expand on the rationale for the WMS rollout across the three retail distribution centres? Do you expect any large operational disruption during implementation? And what efficiency or benefits do you anticipate once it's fully deployed?

So the rationale was to create capacity because the ways of working under the previous warehouse management system limited the amount of product that we could get through these DCs. So in introducing the new warehouse management system, it allows parallel working and just allows throughput through those DCs and extends the life of these without further expansion. Expansion will be necessary at some point. We've been doing that in Centurion over a period of time. Do we expect disruption? I haven't been through a system implementation yet that there isn't some disruption. But what I am pleased to say is that yesterday, And we were actually picking up in the Cape Town DC above levels that we were doing in the prior year. So it's hard work. And I really commend our systems implementation partner, our IT teams, and especially our DC teams for working with us. But I think we've gotten over the hump in that one. And everything is really firing at Cape Town DC now.

Thanks, Scotty. His third question, Clixit Group has built up a strong cash position of 3.2 billion rand. How are you thinking about capital allocation priorities going forward? In particular, would you consider accelerating store expansion or increasing share buybacks?

I think we always look at investing in the business and that we've been doing on a consistent, you know, on a consistent basis for a number of years and reinvesting in our systems. And we've also increased the number of stores. And we've also done some acquisitions over the past few years. We've set out what our dividend policy is and given the range of 60 to 65%. And where the opportunity has come up, any excess cash has been returned to shareholders through share buybacks. don't think any of that is going to change over the next few years we would consider expanding or accelerating store growth where the opportunity came up and we've done that in the past where in certain years we've grown store expansion by 100 stores where there's been an acquisition

Yes, last question on post-period trade is also asked by Satya from Citi, who says, afternoon team, well done on the pleasing results. Can you give some colour on post-period trade?

One of the teams actually asked the question last night and I said, well, I'm not displeased. Gordon and I certainly are not displeased by the performance since we started the new financial year.

His second question is, what sort of inflation can we expect in FY26? Thank you.

I think since our Reserve Bank is doing such a great job on inflation and it's got to be commended for that, you would probably expect that inflation is going to be remaining on the lower side.

And if we can encourage the Reserve Bank to then also look at the interest rates, I think that the consumer would certainly welcome that.

And from NBase Securities says, please can you provide some colour on occupancy costs in retail remaining flat year on year despite higher than guided store growth?

I think the thing to be bear in mind with occupancy cost growth is it's not actually rental related or it's not the rents. It's largely the other aspects of store costs that include parking, etc. It does include some turnover rentals, but it's really the lowest element of the cost growth related to stores. Store cost growth sits in our ROU depreciation and our IFRS 16 charge.

But it also would be fair to say, Gordon, that we have taken control of that as well. We've put in metering, for example. We check all of the bills that are coming through for payment. We don't take it for granted. We've invested in solar. So there are a number of things. We've got automatic switches, for example, in the stores to switch off electricity at night when it's not trading. So it's also known as a consequence of luck. We have done work to get us to that point.

And it also asks about post-period trade, which we've answered, but says in particular store openings, including pharmacies. And I think we've given numbers in the presentation of 40 to 50 stores and 40 to 50 pharmacies. But if we get more opportunities, we will open more. We will.

And maybe the point to call out is that the teams have promised me that we will get to number 1000 by December.

Jovan Jackson from Fairtree says, good day and thank you for the webcast. How should we think about the normalisation of intergroup profit on unicorn stock? Do you recoup this through increased retail margin in FR26?

So this is a little bit of an odd year because of the unicorn disposal in the prior year. What we had was we had an intergroup profit related to the unicorn stock that being purchased when Unicom is still a subsidiary. So that's been unwinding during the year, which is where the integrated profit comes through. That is not a one-off because that does move into retail. That will sit in the retail division next year. So this year is an odd year.

Motso Mokabani from Sunlung Private Wealth says, well done on the net 55 new stores. Can you give some colour on the execution challenges or constraints that resulted in the bulk of openings being delayed until Q4 of the financial year?

We would always prefer to open our stores earlier. What impacted us probably more last year was some weather-related challenges that impacted landlords that just pushed store openings later. But it's not something that we planned to do, but it was an unfortunate impact.

also asks, or says, promotional and private label sales were both up strongly in double digits. And with internal inflation low, one would have expected a bit more of a pickup in volumes than the 2.1% reported. Can you give some comment on what's driving the volume outcome?

So we did have some really excellent growth in certain categories. where it was probably a little bit slower in the year was on the pharmacy side. And that was due to later opening of pharmacies, both this year and the previous year when we couldn't open pharmacies. So we've got, although we've worked really well with the Department of Health, we've still got over 100 applications for new pharmacies that are waiting to be considered there. So as we get these, we're really seeing a very nice volume boost on the pharmacy side, and that also impacts the rest of the store as well as those pharmacies are rolled out because we see a real lift and front shock when we drop in the pharmacies.

Another question from Kamato. With the rollout of the new pharmacy management system leak, have there been any teething issues or disruptions to operations?

Leap was a very different rule out because we can do it on a store by store basis. So it was in a very controlled manner. So no, we haven't really seen any impact of the store rule out.

I was also going to say, you know, one of the things that we learned through the UPD system is that we have invested in project management capability. And secondly, you know, understanding the change management must be integrated into any new particular project as well as training. So I think that's the reason probably, Gordon, even if you look at SAP upgraded UPD September last year, you're looking at the LEAP program, you're looking even now at WMS, I think they've all gone a whole lot smoother because we've taken the lessons and we have applied those lessons and we're trying to do better.

Another question from Kamata. Can you comment on the performance of the 247 stores located in low-income areas relative to your convenience and destination formats. What percentage of these stores include a pharmacy component and have there been any unexpected trends or outliers in performance so far?

Generally, these stores actually ramp up in terms of sales much quicker and they've been performing ahead of the rest of the state. I think the trends that you see are, you know, probably in line with what you would expect you see a very big component of baby in those stores and because we offer you know such good guarantees in our electrical then electrical is also a favorite destination in these stores so but it's better it's not dissimilar to the performance that we see in the other in the other stores

A question from Talia Ginsberg at Omtombo Wells. If 55% of SA population lives within a five kilometers radius to a clicks, would that mean co-mobilization is possible?

Well, the way that you look at it is it's 53.2% to a clicks pharmacy. And remember, we've got 780 pharmacies. So not every store currently has a pharmacy because as Gordon called out, we still have a gap. be working to close with the department of health in terms of the issuance of pharmacy licenses daniel ferryman else from alice and co says well done on the results you mentioned that the wholesale market share losses due to decreased sales to independence is this a strategic choice well you know we've always said the reason we acquired the upd business in the first instance was for italy the preferred supply chain partner to clicks in order to fuel Clix's growth in pharmacy. And then it does very well. And if you look over the period, how the Clix market share within UPD's wholesale channel has just grown, and that's good for UPD. The second one is that UPD has got strength in terms of the list of private hospital groups where you see that happening. And of course, partly it's because UPD up until probably the first half of the year was a little bit hamstrung. by the effects of its systems implementation, but then has now recovered. But what is happening within the private hospital space is there's increased genericisation. So that's having an impact there. Now, are we super concerned about independence? Not necessarily. And the reason for that is because we've always said UPE, because of its low margins, has to always focus on efficiency and profitability. And what we shouldn't be is a place where people use us just to circle through. because they are managing their credit risk.

Warwick Ban from RME Morgan Stanley asks firstly, what are the challenges of the body shop?

The challenges of the body shop is, you know, as always, when you've got a change of ownership, first of all, you know, there are some transition challenges there. The second bit is that the new owners, as one could expect, focus on the areas that they wanted to turn around first, which was the corporate portfolio, the body shop corporate portfolio in both the UK and, of course, within the US. And what that meant is that product development and innovation, which is so critical to any beauty brand, was maybe put later on the agenda. Now, that's where we are and we can see the new product ranges coming through. So, I mean, I think we are cautiously optimistic about what the future holds.

The second question is about what we think about the medium term prospects for the small electrical appliances sales growth. I don't know if there's anything more you want to add from what you've said. No, I think we didn't have sufficient stock in the first half and the market had an oversupply. I have a very complicated list of questions here from Dino Connors. Given the disinflationary pressure on comparable store sales, volume growth, OPEX control, and further total income margin expansion will likely be required to provide earnings support. With this in mind, could you provide a bit of colour on one, the GLP-1 opportunity for CLICS and ASA?

GLP-1s have been growing very, very fast over the past 24 months. We referenced that interim. To bear in mind, They're high sales, but because we maintain a very low dispensing fee, our income that we generate from those GLP-1 is much lower than any sales growth. The opportunity would be as the originators genericize, and that is where there would be likely to be some margin that's possible, because generally in the generics, you're earning a higher margin than the originators. on the, especially on the UPD side in terms of distribution.

Secondly, is there any expected benefit to clicks following the recent Supreme Court ruling allowing pharmacists to now administer HIV treatment?

Well, what we had done, as you know, in that particular case, we did provide commentary. Obviously, you know, we, our public health agenda is how do you extend access to affordable health care? And you're talking here about a vulnerable segment of the population. that we could most certainly support both through our pharmacy program. So we are reviewing very carefully the implications of the decision or the judgment and what, if any, how would we respond to that? But we are supportive broadly of the outcome of that judgment.

Maybe the rollout of PCDT or primary care drug therapy pharmacist model and whether you're seeing any consumer traction here.

We've probably seen more traction in terms of the virtual doctor consultations and most certainly an increase in medical co-funded services, medical aid co-funded services through the clinics itself. So those are probably the two areas we'll continue to focus on.

Paul, are there any OPEX leaders you can pull to drive positive operating leverage in existing stores?

I think some of that's going to come out of the systems investment because that was the reason for investing in LEAP. So to free up the time of the pharmacist to consult with patients and hopefully to deal with more patients in the same period of time. There are always opportunities that we've got because we can look at the same that we've done with UPD, rolling out smaller electric vehicles within the retail DC network, because we saw that UPD managed to slightly reduce their overall transport cost with those. So we're always on the lookout, the big things that we've done, but we've always been able to eke out further efficiencies.

And I think we've answered these remaining three questions, which are on the outlook for inflation, the benefits of LEAP and the WMS possible disruption. Salome Maruma from Emergence Investment Managers says, hello, everyone. Well done on the performance. On Unicare, how are the store economics of the 24-hour store versus a normal flex with a pharmacy in it? What are the opportunities with this kind of product?

The opportunities, we always say, is about ensuring that we, in the mind of the customer, in the mind of doctors and the healthcare profession, are seen as the place to go to. So first, I think, understand our positioning in terms of healthcare. What Unicare does, Unicare offers a comprehensive suite of services. So that's why we talk about the wound care clinic, In fact, the catchment area, so if your normal catchment area for a Clicks pharmacy is five kilometres, for a Unicare store, it's actually 50 kilometres. And so you've got a much broader catchment area from which you draw patients. You now find that many of the specialist doctors actually refer their patients to a Unicare store. Thirdly, there's an opportunity for medical aids. So I think that the specific data point is that something like over 50% of patients of medical aid members who go to an ER24 service should not have gone there first if they could have gone to a doctor. So the fact that we've got a 24-hour doctor service attached to the 24-hour specialized pharmacy means that we can support medical aid schemes in that regard. And of course, the script flows into that store. There is other things such as, for example, diabetes management, the IV infusion clinics, and the travel clinics. Unicare, for example, works a lot with corporates to drive vaccination. So, you know, very often corporate people that are travelling, all local municipalities, the people that work, for example, in sanitation, they've got to have certain vaccinations. And so it's a very, very different format. High, high, high service touch that we have there.

Janae Bray from Lauriam Capital says, congrats on the results. How much of a concern is ShopRite and Spar's expansion into pharmacy? And with regards to your market share gains, who are you gaining market share from?

I guess we're thinking about that one for a minute. First, I mean, my own view always is competition is good because, you know, if we weren't doing a good job as a drugstore, then no one would be interested in trying to emulate our success. So that's the first thing I take from that. The second is to always remember you mustn't be arrogant and you mustn't be complacent about your success. So that's the second part, that we look at the competitors coming in and we understand that it's because we've been able to show them that you can do this successfully and profitably. And I think, you know, it's always being aware of what it is that they're doing and how do you respond to it. to really, really, really compete with us, you have to have an integrated pharmaceutical distribution, wholesale and retail pharmacy model supported by the independent group, such as WIC. And I think that if you, that is probably our single biggest advantage, our single biggest advantage is that we've got a completely integrated strategy. And then of course, the fact, you know, that if you spoke only about, if you ask the customer, Name me a pharmacy. Well, you know, we come up first consistently. Someone else comes up second, not a grocer. And third comes up Link, which is a brand that we own. So I think that we are very well positioned without being arrogant and without being complacent because we are still nowhere as great as we could be. We are only on the path to greatness now.

Jimmy from AAP asks, with 47% of sales now promotional, do you see that as the new normal and how will you protect margins if that level persists?

I think if we look at the last few years, we've consistently grown promotional sales as a percentage of our total sales, which we've been happy to do because suppliers have worked with us because they wanted higher volumes and have funded the growth in promotions. It's also supported by the growth in our private label, which is at a higher margin. And that's also allowed us to evolve margins over the last few years. I don't see that this is going to change.

Craig from Denka Capital says, thanks for the presentation. Given the trading margin is near the top of the medium term target range, and you have alluded to not updating your targets at this point, you provide any further detail around the margin profile going forward?

I think we will always be aiming to evolve our margin which is what one of the graphs showed. We've also got to bear in mind that if you take something like the unicare format which is profitable and that it's much higher turnover and to a certain extent that could result in a little bit of margin deletion, but not profit. So we've just got to bear that in mind over the next 12 to 18 months. But the rest of the business will be evolving the margin.

Some more questions from . Can you give some colour on how Flexicare is performing and whether it's starting to gain real traction or scale within the business? Also, are there deliberate plans in place to accelerate growth of the offering?

Well, we are working with the Discovery team. It would be fair, I think, to say that, you know, we are not satisfied with the performance of Flexicare. And so we are working with our partner, which is Discovery, to say, you know, what is it that we have to do to improve the performance of the Flexicare product?

And I think in the interest of time, a last question from Huanta. Can you give some colour on the rationale behind strengthening and expanding the group executive team? Where did you identify capability gaps or areas needing reinforcement?

It's not so much, you know, about identifying gaps. It's about, you know, what is it that we have to do to ensure that we are positioned for the future? That's really what it is all about. So first, South Africa, there can be no doubt, South Africa has got tremendous opportunities for us to expand. And it therefore made sense that we focused on South Africa. And that is why when we were appointed to specifically focus on South Africa. Then when I look at the rest of Africa retail and the complete outperformance of it, it made complete sense to say, now what we do need is an executive that can focus specifically on the rest of Africa because every market is different. And we most certainly want to make sure that we get the offer right. So this is about Southern Africa and the areas in which we already are. You look at Namibia as an example, where we have added two stores in the last 12-month period. You know, the forecast for Namibia's GDP growth is fantastic. Why would we not be there? But it's about the focus on the rest of Africa. The third one is around people. I used to head up people and corporate affairs, and it was making sure that we do not neglect that in a retail business, the people are the difference and that we needed to have a person at this level. And then finally, it's, well, of course, UBD. And then the final one is that we've made investments in adjacencies such as Sorbet, And in Unicare, which are all health and beauty, what we now need to do is to ensure that we've got dedicated focus on that as well. So that was the reason for expanding the group executive.

Not gaps, but opportunities to do better.

There being no further questions, thank you so much, everyone, for dialing into our webcast. The questions that you asked were really great. It's made me think, and I'm sure Gordon as well, and we'll leave it at that. Thank you.