CEO David Kneale leaving Clicks in robust health
By Nick Hedley - Oct 26th 2018, 09:17
Retiring Clicks CEO David Kneale says he is “going out on a high” and that the business has good growth prospects given that only half of SA’s population lives close to one of the group’s stores.
Kneale will be replaced by internal candidate Vikesh Ramsunder at the end of 2018, but will thereafter take on the role of group strategic adviser until the end of August 2019.
Under Kneale’s watch, Clicks broke into the JSE’s top 40 index for the first time in June, and the group reported a 15.5% increase in net profit for the year to end-August, to R1.5bn. Revenue was up 9.3% to R31bn, while the total dividend rose 18% to R3.80 per share.
The share price jumped 6.75% to R174, its highest close since the start of October. The FTSE/JSE all share index was up 1.47%.
“I’m going out on a high, but there’s still a long runway of growth ahead for the brand,” Kneale said, referring to Clicks’s plan to have 900 stores in SA within the next seven to 10 years, from 663 today.
“It’s not a number we’ve plucked out the air — we’ve mapped the South African retail footprint and only around 50% of South African households live within 5km of a Clicks store."
“If I look at drug stores in North America or the UK, that percentage would be circa 75%, so that demonstrates the capacity for growth given that the key thing customers want from a drug store is convenience.”
Clicks planned to invest R700m in its business in the year to August 2019, he said. That included the opening of 25-30 new stores, 30-35 new pharmacies, and 60 store refurbishments. It would also invest in supply chains and information technology systems.
Kneale said Clicks achieved a strong result in the year to August despite fewer South Africans falling sick over the winter months.
“It was, I think, a milder winter, so that’s depressed medicine sales which meant it was a tough second half, but that points to the strength of the brand because we traded our way through that.”
The Clicks ClubCard programme also boosted sales. Active membership numbers rose more than 800,000 to 7.8-million, he said.
David Oberholzer, an equity research analyst at Nitrogen Fund Managers, said Clicks reported “an above-satisfactory set of results” with healthy same-store sales growth.
Oberholzer said Kneale had built a solid foundation for the group, which was set to perform well post his retirement.
Meanwhile, Kneale said it was too early to comment on the implications for pharmacies of the recent Constitutional Court ruling that effectively decriminalised the private use of cannabis in SA. But if the state allowed for medical marijuana sales, “we would be there as the country’s leading pharmacy operator”.
Dis-Chem CFO Rui Morais said last week the ruling “is certainly something that we’re looking at … I think it presents both risks and opportunities”.
Cannabis is used to treat pain and mood and sleep disorders, among other ailments.
“As our understanding evolves and as there’s more clarity in terms of what the regulation includes or precludes, that would translate into the strategic direction we’ll take,” Morais said.
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