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Former Clicks CEO’s R106m payday

David Kneale very well rewarded for retailer’s outperformance.
The group’s performance during Kneale’s tenure was extraordinary. Over the last five years, its share price is up over 220%. Image: Supplied

Former Clicks CEO David Kneale, who retired on January 1, was paid a total of R106.4 million in the group’s 2019 financial year. Of this, R87 million was from the vesting upon his retirement of long-term incentive appreciation units from the 2016-2019 and 2017-2020 schemes.

For the four months in the 2019 financial year before he retired, Kneale was paid a salary including pension and other benefits of R3.8 million. He was also paid a short-term incentive of R6.6 million and a “retirement long-service award” of R1.7 million.

The group also retained him as a “strategic advisor” until the end of the fiscal year at a “guaranteed salary of R7.2 million”.

Kneale was CEO of the Clicks Group for 13 years, having joined the chain from the UK’s Boots, where he was chief commercial officer. Upon retirement, he had worked in retail for over four decades. In last year’s annual report, when Kneale had already announced his retirement, chair David Nurek says: “David is an exceptional leader who has made a significant contribution to the growth, development and value creation in the business.

And: Clicks CEO is all about dotting the i’s and crossing the t’s

“Under David’s leadership since 2006 the store base has more than doubled, revenue has trebled, operating profit has increased six-fold and the market capitalisation on the JSE has grown from R3.2 billion to close to R50 billion.

“Clicks and UPD [United Pharmaceutical Distributors] are now established market leaders with significant organic growth prospects. Significantly, in these times, more than 6 000 jobs have been created across the group over this period.”

While not the original architect of Clicks’s pharmacy strategy – he inherited a group which had 100 of them across its 300-odd store footprint – Kneale certainly ensured the pharmacy model worked properly before pursuing an aggressive rollout of these across the country.

Drugstore

He noted in last year’s annual report that “Clicks was conceived as a drugstore but owing to restrictive legislation preventing corporate ownership of pharmacies, it took 36 years before [founder] Jack Goldin’s founding vision was realised. After opening the country’s first-ever corporate retail pharmacy in 2004, Clicks opened its 500th pharmacy in April [2018]”.

In the year to August 31, Clicks expanded its network of pharmacies by 35, bringing the total number to 545. It says there are 76 stores “still to get a pharmacy” (this excludes sites where it doesn’t plan to open a pharmacy).

New CEO Vikesh Ramsunder makes the point that “currently 51% of the population live within 5km of a Clicks store and within 6km of a Clicks pharmacy, highlighting the convenience of the chain”.

Today, one in four medicines sold in South Africa is from a Clicks pharmacy.

The performance of Clicks during the tenure of Kneale has been extraordinary, with the group easily the top-performing retailer on the JSE, especially in recent times.

Over the last five years, its share price is up over 220%.

Stellar share price growth

Since listing in 2016, Dis-Chem Group is up 26%. Pick n Pay is up by a similar number over a five-year period. Shoprite Holdings is down over 20%, while The Spar Group is up over 30%.

Read: JSE Superhero No 1 – Clicks

And: Clicks – if the price was right

Clicks has delivered strong compound growth since 2015, with turnover up 10.4% and headline earnings up 15.3% on this basis. Average return on assets over this period was 13.9%, and on net assets 97.7%.

Kneale has been very well rewarded for this performance via the group’s long-term incentive schemes.

 

Total annual guaranteed pay

Return on net assets short-term incentive

Performance-based long-term incentive

Total

2016

R8.775m

R6m

R20.876m

R35.1m

2017

R9.6m

R5.449m

R48m

R63.6m

2018

R10.56m

R6.3m

R52.8m

R69.7m

2019

R3.8m

–*

R3.8m*

* Given the nature of the incentive payments, long-service award, advisor fee, as well as the vesting of the long-term incentives, these are excluded from Kneale’s statutory remuneration for the year. Kneale was not awarded any appreciation rights in the 2018-2021 or 2019-2022 schemes.

In 2018, Kneale was paid a total of R69.7 million, with his long-term incentive of R52.8 million capped at five times annual guaranteed pay “in accordance with the rules of the scheme”. A year prior, this was also capped, and Kneale received long-term incentives based on performance totalling R48 million.

Kneale joined the board of Woolworths Holdings as an independent non-executive director in March.

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Good for him, paid for performance. Now to get these individuals into the soe’s.

Hats off to him.Heres hoping Clicks will perform well into the future. Many a change of leadership has left a company lacking foresight and direction. There are many case studies to prove this.Remain humble Clicks and all of the best in the coming years..(Take it easy on the rebates with your suppliers..Without them you don’t have a business)

The payments seem well deserved, he transformed clicks to what it is now.

One cannot begrudge a man who delivers this kind of return. Good luck to him. But when Woolworths, Nampak CEOs get paid millions for destroying shareholder value-then that underperformance should make headlines! Mr Kneale delivered-the vast majority of SA CEOs did not!!

CR, give him a SOE to run !!!

The numbers speak for themselves. The man has earned every penny, and secured jobs for thousands, AND enriched shareholders. Well done Sir.

End of comments.

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