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Clicks reports increase in profit, plans to continue expansion

CEO Vikesh Ramsunder notes good growth in health and beauty sales, and in distribution business UPD, with shareholders getting an interim dividend of 142.5 cents/share.

NOMPU SIZIBA: Beauty and pharmaceutical retailer Clicks released half-year results today, April 22, 2021, for the six months ended February 28, 2021. The retailer announced group turnover up 7.6% at R18.1 billion. Diluted headline earnings per share rose by 9.5%. And the company notes good growth in its health and beauty sales, as well as its distribution business, UPD (United Pharmaceutical Distributors). Shareholders are getting an interim dividend of 142.5 cents a share.

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Well, to take us through the results I’m joined on the line by Vikesh Ramsunder. He’s the CEO at Clicks. Thanks very much for joining us, Vikesh. All your metrics are pointing in the right direction, and others like your health and beauty sales are up 7.2% and your distribution business, UPD, up 9%. So you proved quite defensive during the Covid period, and of course you are not subject to as many restrictions as you were earlier last year.

VIKESH RAMSUNDER: Obviously that’s correct. But within the 7.2% growth you would have noticed that health was the strong performer, but beauty and some of the other categories were more muted. So you can see that Covid-19 did have an impact on our business but, as you said, we are fortunately quite a defensive business.

NOMPU SIZIBA: With the Covid pandemic still very much a reality in the period under review, what were your direct costs in that regard?

VIKESH RAMSUNDER: We managed to grow costs by 4%, as you can see. So we kept our costs relatively tight. The most important thing was trying to service our customers, ultimately. The big challenge, as you know, is the comparatives are not like on like. We are comparing a Covid-impacted period with a non-Covid impacted period. And that’s why I do feel a bit more confident that it’s got to get better. We’ve probably been through some of the worst now.

NOMPU SIZIBA: Your distribution business, UPD, saw wholesale turnover up 13.8%. It looks like an impressive number, and you say you managed to grow market share. Where did you see the growth come from?

VIKESH RAMSUNDER: The growth predominantly came from hospitals. You know, UPD is a big supplier to the listed hospital groups and, because of the impact of Covid, specialist medicines and all that kind of stuff required, UPD had the product and was able to supply the majority of hospital groups. So the bulk of their growth actually came from hospitals.

NOMPU SIZIBA: You managed to grow your operating profit by 9.7% to R1.4 billion. I suppose part of that was the story with your costs. You did tell us about your costs coming in at 4.2%. How did you manage to contain costs?

VIKESH RAMSUNDER: I think we are very circumspect in the way we spent money, of course on, for example, travel. We are working from home, we are using digital, we are very cautious in how we manage our shifts of people and so forth.. So we turned [over] every stone within the organisation to make sure that we were cost-efficient.

But if you really look at our growth in health and beauty, we’ve managed to maintain or grow margin slightly. At the same time, with good cost control, health and beauty profit grew 11% for the period.

NOMPU SIZIBA: I want your observation around things like masks and sanitisers. At the beginning they were in short supply and it was tough to get them. And then at some point there was a lot of availability and a lot of demand. Have you seen that taper off since, or do you notice when you analyse data from people’s rewards cards that people are buying sanitisers and marks once a month, or whenever it may be?

VIKESH RAMSUNDER: Certainly customers continue to buy sanitisers and masks. The demand has slowed, of course. When the pandemic first broke there was a massive surge in demand, and I think that was a bit of panic buying by consumers. As consumers understood that they could get these products on a regular basis, it subsided. And it’s a replenishable item, I think, in everyone’s household at the moment. So sanitiser sales and mask sales continue to be a regular demand product in our stores.

NOMPU SIZIBA: I see that you’re planning on making a capital investment of R745 million during the current financial year. Where are you going to be focusing resources – where do you see growth opportunities?

VIKESH RAMSUNDER: As always, we spend the bulk of that money on our stores,

We’ll be opening up to 40 new stores for the year and 36 pharmacies. We’ll also be refurbishing 40 stores.

It’s very important that our trading environment looks very modern, and that’s key for our customers. So we’ll be revamping our stores. We’re also upgrading our IT systems to make sure that they give us efficiency and better returns moving forward, particularly on working capital. So a lot of the money is going really into IT and the store features.

Musica

NOMPU SIZIBA: Sadly, we learned that you had to close down the Musica stores. How was that process managed? Were you able to help transition some of the staff to other opportunities, or were most of them made redundant?

VIKESH RAMSUNDER: I’m actually just as sad as you are, I have to tell you. I ran Musica as a general manager for some years in my career as well. So it was a very sad and emotive moment for me. But we recognise that the business model doesn’t work any more. Over several years now we’ve closed Musica. But I use the word ‘responsible’. We made sure that it didn’t affect our employees, we didn’t affect even our suppliers in a significant way, because if you just close a business that has a massive impact.

And with the growing Clicks chain we were able to absorb almost 100% of our Musica employees.

It’s something we’re quite proud of, to be honest.

Vaccination rollout

NOMPU SIZIBA: We recently heard that you’re partnering with your competitor Dis-Chem to help the government in its Covid-19 vaccination rollout. How are you guys going to be assisting? And are you as Clicks ready to activate whatever plans you have in place?

VIKESH RAMSUNDER: Yes, certainly. I would say the one thing. When it comes to the vaccine rollout, none of us should be competitors, because ultimately we all want to be safe, and a growing economy ensures that we all benefit. So I think every organisation should be committed to a good rollout. I certainly think we ready. We have 600 pharmacies, we’ve trained our pharmacists. We’ve spent some capital on making sure that, when customers do come into our stores to be vaccinated, that it’s private. We’ve tried to source extra resources for the vaccination programme. But ultimately we are dependent on what government decides, and we are here to support government in every way possible.

NOMPU SIZIBA: Then, just in terms of the balance of 2021, what’s your expectation? We know that the economy is still a little bit on a wobble and there is still quite a bit of uncertainty, but what are you hoping for?

VIKESH RAMSUNDER: I think we should be optimistic. A year ago we were running around in our gardens. Today we can go out and we can shop, and the infection rates are lower with the rollout of the vaccination programme to end by the end of February, if everything goes well. Life should return to some level of normality. So I think we should be optimistic and rise above any negativity that comes our way.

NOMPU SIZIBA: That was Vikesh Ramsunder, the CEO at Clicks.

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She should have asked what it took to get the EFF off their backs?

I have tons of nostalgia for this brand from when I was very little. I’m glad they have turned it around.

End of comments.

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