INVESTMENT CASE

New Clicks offers shareholders a sustainable investment proposition. The group’s business model and market positioning continues to yield positive results and the organic growth strategy offers exciting prospects in the expanding healthcare market in South Africa. Despite the retail sector being under considerable pressure owing to the current slowdown in consumer spending, New Clicks has shown its resilience as a defensive stock.

MARKET POSITIONING
  • Market-leading positions in all businesses
  • Largely defensive business, with 75% of turnover being non-cyclical
  • Predominantly cash-based retailer
  • Clicks the first choice health and beauty retailer
  • UPD the only national full-range pharmaceutical wholesaler in South Africa
  • First mover advantage in corporate pharmacy
    – model proven internationally

CUSTOMER PROPOSITION
  • Strong, well-established brands serving middle and upper income markets
  • National footprint of over 500 well-located stores
  • As a value retailer Clicks is highly price competitive
  • Largest pharmacy network in SA with over 150 in-store dispensaries
  • Over 2.5 million customers on Clicks ClubCard loyalty programme

GROWTH PROSPECTS
  • Strong organic growth prospects, particularly in healthcare
  • Clicks vision is to operate a pharmacy in every store
    • scope to open pharmacies in a further 50% of stores
    • 40 – 50 pharmacies planned per year
    • 20 – 30 new stores per year
    • corporate pharmacy still only 25% of market in SA
  • Clicks private label programme offers differentiated products at higher margins
  • Group positioned to capitalise on anticipated consolidation in retail pharmacy and pharmaceutical wholesaling and distribution

FINANCIAL MANAGEMENT
  • Three-year compound growth of 32% per annum in diluted HEPS
  • ROE more than doubled over past three years
  • Culture of investing in growth of customer base, infrastructure and people
  • Cash-generative business
  • Active capital management programme enhancing earnings

This investment proposition should be considered together with the risks facing the group, as outlined in the Risk Management Report.