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.