Now that the group's “drugstore” model has proved successful, management is shifting gears. The ROE target was revised from 30% to 35%-40% between 2009 and 2011. It has also introduced a convenience format for Clicks and the number of stores will increase from 320 to 400.
“The strategy is entrenched, stock management problems have been resolved and market share losses reversed. Now management will concentrate on extracting more value from the model,” says Gryphon Asset Management equity analyst Abri du Plessis.
During the past financial year, pharmaceutical sales passed R1bn for the first time, as did the sales of private label and exclusive brands. More than 150 instore pharmacies have been opened and Clicks increased its retail pharmacy market share from 9.3% to 10.7%.
Turnover from the retail businesses of Clicks, Musica and The Body Shop rose by 9,2% on a comparable store basis, with price inflation of 3.8%. UPD, the group's pharmaceutical distributor and wholesaler, lifted turnover by 13.3%. The retail operating margin improved from 5.4% to 6.1% while UPD's margin was maintained at 3.2%. This translated into a 19.9% increase in operating profit to R592m.
Capital expenditure of R250m has been committed for the year ahead: R200m (up from R160m) for refurbishment and the addition of dispensaries and new stores, with R50m being allocated for investment into UPD.
Source: Financial Mail
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