Good afternoon. Thank you for joining the webcast of our interim results for the six months, end of 28th February 2025. I am Bertina Engelbrecht, Chief Executive Officer of the Clicks Group. I am joined here today by Gordon Traill, our Chief Financial Officer. Together, we will take you through the presentation of our interim results. I will respond, together with Gordon, to any questions that you may have after the conclusion of our presentation. This slide sets out the outline of our presentation. I will kick off with a review of our performance of the past six months. Gordon will follow with an overview of our financial results. Hereafter, I will walk you through the trading performances of our operating business units, starting with Clicks, followed by UPD. I will then close with the outlook for the group.
Please feel free to submit any questions you may have via the webcast platform during or after the conclusion of our presentation. Sue Hemp will read out your questions to which Gordon and I will respond. Before I commence with a review of the period, I would like to acknowledge the invaluable contribution of David Nurek, our former chairman, who retired in January. His keen insights, selfless commitment to the company, and support to our executive team will be sorely missed. Thank you, David. I will now take you through the review of the period. We delivered another solid set of results, with diluted headline earnings per share up 13.2% in spite of the tough trading environment. Our performance is due to the proven resilience of our business model and defensiveness of our core offering. As a group, we remain focused on delighting and creating value for customers.
We achieve this by investing in the expansion of our store and pharmacy network, technology enablement, all stakeholders, including our people, and our sustainability agenda. In the period under review, we opened our 950th Clicks store in Klerksdorp and our 740th pharmacy in Vryheid, and we increased our pharmacy care clinics to 216. Our active loyal Clubcard customer membership base increased by 1.1 million new members over a 12-month period to 12.1 million, and they contributed over 81% of retail turnover. UPD has recovered from its wholesale systems implementation and managed its expenses, as Gordon will shortly detail very well. In February, UPD launched South Africa's first fleet of pharma-compliant electric vehicles. Most of these have been assigned to our owner drivers. The teams also worked hard at improving all elements of our transformation agenda and achieved a BBBEE level three rating.
I now hand over to Gordon, who will take you through our financial results.
Thank you, Bettina. Good afternoon. If we consider the group financial highlights, group turnover increased by 6.2% for the period. Retail turnover grew at 6.4%, and UPD reported turnover increased by 7.6% as Legal Aid recovered from the system implementation in the prior year. The group trading margin at 9.1% increased by 60 basis points due to the faster growth of retail and the continued improvement at UPD. The diluted headline earnings per share for the group increased to ZAR 6.04 per share, up 13.2% on last period. In the six months, ZAR 1.7 billion was generated in cash from operations after working capital. The group's return on equity at 46.2% has increased from the prior period. To note that subsequent to the end of the period, we have carried out buybacks of ZAR 372 million, which will benefit the return on equity and HEPS for the full year.
The dividend declared for the period has been increased by 13.3% to ZAR 2.38 per share, slightly ahead of headline earnings. Retail sales increased 6.4%, with same stores growing 4.6%. Sales, excluding the unicorn disposal and the extra trading day in the prior year, increased by 8.3%. Same store growth, excluding the extra day in the prior year, grew by 5.4%. The distribution business experienced low selling price inflation of 2.1%. UPD sales were stronger in half one as they recovered from the systems implementation in the prior year. Sales to Clicks were up 14.7%, while hospitals were up 4.7% for the period. Bettina will elaborate on the detail of each business's performance later in the presentation. This slide reflects the group's total income, which has increased by 8.9% for the period.
You can see the total income margin in retail was 50 basis points higher than last year due to continued growth in beauty, health, and private label. UPD's total income margin was down 20 basis points to 9.4%, which was due to the lower SEP increase compared to two increases in the prior year. Overall, the faster growth of the retail business at 7.8%, together with the lower intergroup turnover elimination resulting from the unicorn disposal, resulted in the group's total income margin being 80 basis points higher than the prior period. The cost base in retail increased in the period, partially due to the wage increase of 7%, higher electricity costs, although lower than the headline rate increase, card acquiring charges growing slightly ahead of turnover due to mix and advertising costs.
Retail costs grew overall by 8.5%, with new stores contributing 2.5% to the cost increase, with the lower rollout of stores in half one. Over the last 12 months, we have added 48 Clicks stores and 22 pharmacies to the group. Pleasingly, we have opened 20 pharmacies in the last six months, with the resumption of licenses being issued. The IFRS 16 interest charge increased as a result of the number of renewals in the period. Comparable retail cost growth overall, excluding new stores, was up 6%. UPD's costs have grown at 1.6%, which was behind turnover and has recovered from the systems implementation in the prior year. Depreciation also increased as a result of the completion of the system implementation. Employment costs were well controlled, and costs related to the system stabilization in the prior year were removed.
Other costs grew slightly faster due to higher packaging and delivery costs. Packaging costs are expected to reduce with the further rollout of reusable packaging. Operating costs overall were well controlled. Retail grew trading profit by 5.9%, with the margin flat year on year. With the inclusion of the intergroup turnover elimination as a result of the unwinding of the unicorn unrecognized income, the margin was 10.2%. This is within the guided range given in the prior year. UPD's trading profit increased by 15.8%, with the trading margin increasing by 20 basis points due to improved sales and better operating cost control. Overall, the group's trading profit increased by 12.6% to ZAR 2.1 billion for the period, driven by strong performance in both businesses. Inventory levels for the group were slightly lower at 85 days.
Retail stock days were two days higher than last period and growing slightly ahead of underlying sales growth. Inventory was slightly higher due to the growth in pharmacies, SEP, and targeted front shop buy-ins. Retail networking capital days reduced by two days due to improved trade debtor and trade creditor days. UPD inventory days at 52 days were nine days lower than last year. Trade debtor days were higher by four days due to some late payments received at the beginning of the following month, and trade creditor days decreased by five days due to the lower inventory levels. Net group working capital increased by one day. This slide shows the movement of cash during the period.
As you can see, we started the period with cash of ZAR 2.7 billion, reflected in dark blue on the left-hand side, and ended the period with ZAR 1.7 billion on the right-hand side of the slide. The group generated cash of ZAR 3 billion, highlighted in green, before the repayment of lease liabilities amounting to ZAR 405 million, working capital outflows of ZAR 1.3 billion, and tax payments of ZAR 646 million. ZAR 222 million was reinvested in capital expenditure across the group. Of this amount, ZAR 123 million was invested in new stores as well as store refurbishments, and ZAR 59 million was spent on IT and other infrastructure, including the completion of the 6,000 sq m expansion of our Centurion DC. We returned ZAR 1.3 billion to shareholders during the period through dividends. CapEx of over ZAR 1 billion is planned for the full year. ZAR 578 million will be invested in our stores and pharmacies.
This will include 45-55 new Clicks stores and pharmacies, 70-80 retail store refurbishments to ensure they remain modern for our customers. ZAR 447 million will be spent on IT systems and infrastructure. ZAR 86 million of this amount will be invested in UPD IT and warehouse equipment, and we will invest the balance of ZAR 361 million in retail IT systems and infrastructure. We will continue to grow our retail footprint and grow the number of pharmacies and complete the rollout of our modern pharmacy system.
Thank you very much, Gordon. I will now take you through our trading performances in greater detail, starting with Clicks, then UPD. Let us turn to the retail performance. This slide sets out the retail sales performance and contribution at the category level. We have, for comparative purposes, excluded the turnover of Unicorn Pharmaceuticals as well as the extra trading day in the 2024 period. Clicks has delivered a solid performance with turnover up 8.3% for the period. Sales turnover in comparable stores, excluding the extra trading day, was up 5.4% as inflation declined from 7.4% to 3.3%, while volume growth improved from 1.4% to 2.1%. Whilst small in contribution, our 54 stores located outside of South Africa outperformed local stores, achieving turnover growth of 10.3%. I will now briefly turn to each of the categories on this slide.
Our continuing focus on enhancing our service offering is the key to the outperformance of healthcare, with both pharmacy and front shop health growing turnover ahead of the total Clicks business. These two categories now constitute 51% of turnover. Growth in pharmacy of 9.2% was driven by all of the scheduled medicine classes, even though the issuing of our pharmacy licenses only commenced in November. In Schedule I and II, the top performing categories were stomach health and muscular. In Schedule III plus, diabetes performed exceptionally well due to the increased demand for Ozempic and Mounjaro. Front shop health was our top performing category, up 9.8%. Whilst all subcategories performed well, customers clearly focused on sports, swimming, and supplementation. Private label created differentiation and newness as we extended our Smart Bites range, launched Glute, a weight loss brand, as well as OptiHealth, which is our first premium supplements range.
The rollout of the health elevation lifted the front shop health performance overall. Hence, our decision to roll this out to 50 more stores in half two. The investments in our elevated beauty hauls and fragrance counters enhance our beauty offering. In color, big brands like L'Oréal, Catrice, and Essence achieved strong double-digit growths. We invested in skincare project stores supported by strong promotional campaigns to entrench our positioning as a beauty destination. In beauty, newness and innovation is a key driver of turnover. In the period, newness contributed 8%. This is short of our target of 10%. Personal care performance was buoyed by exceptional growth in private label sales, up 20.5%. This was due to the outperformance of products such as Click Sun Protect, Clicks Body Freshness, and Clicks Sand Pro. Promotional sales, up 18%, was also instrumental in the performance of the personal care category.
Our performance in general merchandise, up 4.5%, was disappointing and will be an area of focus as we seek to improve our competitive positioning, promotional mechanics, and range assortment. I will now turn to our market share performances, starting with health. The retail pharmacy market share was maintained at 23.8% despite the delay in the issue of new pharmacy licenses. The South African Pharmacy Council monthly meeting schedule was impacted by a number of factors, such as the summer holiday period. We nevertheless opened 20 new pharmacies in this period, mainly in the second quarter. We have a steady pipeline of pharmacy licenses, which inspires confidence that we will resume our market share gain in retail pharmacy this year. Front shop health gained 30 basis points overall, fueled by strong gains in foot scrubs, up 306 basis points, and sports and swimming, up 122 basis points.
The execution of our multi-pronged baby strategy is the driver of our market share gain of 170 basis points, fueled by particularly strong performances of our private label and exclusive brands. Whilst every subcategory gained market share, standout performances were recorded in baby diapers, up 188 basis points, and baby dry food, up 423 basis points. We are a destination for beauty. Our annual beauty playground event is a must-do opportunity for beauty enthusiasts. Skincare gained 120 basis points with strong gains recorded in facial scrubs, up 185 basis points, and face masks, up 201 basis points. Haircare too turned in a solid performance and gained 20 basis points in market share. Personal care gained 90 basis points with strong gains in hand and body, up 146 basis points, and body freshness, up 90 basis points.
The decline of 70 basis points in market share of our legacy category of small household electrical appliances can be attributed to share declines in indoor cooking and food prep, whilst we continue to gain share in electrical beauty. Great value as a key brand pillar has sustained the group during constrained economic conditions such as we are currently facing. Competitors are investing in price to compete, yet we remain price competitive with all national retailers, even excluding our promotional pricing, bulk office, and 342 promotions. Over the years, our strap line has evolved from "You pay less" to "Feel good, pay less." Our monthly pay less promotional campaigns resonate and drive shoppers to our stores and our online platform. Promotional sales was up 13.2% and contributed 47.1% of turnover. Confirmation that the consumer responds to value.
In pharmacy, we deliver value with lower-cost generic medicines, which was up 7.5%, accounting for 59% of sales by volume and 70% by value. The weaker value growth of generics was impacted by the surge in demand for originator products such as Ozempic and Mounjaro. In the past six months, we paid back a whopping ZAR 438 million in cashback to loyal Clubcard members as a reward and to ease their financial stress. Incredibly, we have paid back ZAR 3.3 billion to Clubcard members over the past five years. Private label and exclusives differentiate our product offer, allow us to tier our pricing to support customers who trade up or down, and to maintain our total income margin as we open up more pharmacies.
More than 15 years ago, when we decided to invest in building our private label capability, we did not imagine that it would deliver such a considerable strategic advantage. Our private label program also supports local product development and local manufacturing. Private label delivered double-digit growth of 10.1% and contributed 26.5% of total retail sales. In front shop, the contribution was 31.4%, and in pharmacy, 11.8%. Our brand values resonate with customers. Our focus on quality as the anchor of our private label product portfolio has been rewarded with both our Clicks Made for Baby diaper and Sorbay Baby cream recognized as South African Product of the Year. In 2023, one in four diapers sold in a Clicks store was a Clicks private label diaper. In 2024, it was one in every three. Now, it is one in every two.
In this reporting period, private label sales contributed just under ZAR 5 billion of total retail sales. We are understandably proud of the quality portfolio that our private label team has built. Our Clicks baby standalone stores are creating a halo effect. Over the past year, we focused on our product ranging and service elements to enhance profitability. Our baby store-in-store sales are exceeding expectations. Consequently, we will increase the count from the current eight baby store-in-stores to 15 by the end of this financial year. Baby sales in our online channel is now our fastest-growing category, yet we believe that we still have opportunities to enhance our online offering. We have built partnerships with medical aides to drive patients to our clinics for a range of services such as diabetic care. These partnerships have been instrumental in the delivery of turnover growth of 11.6% in our primary care clinics.
The investment in our stores and pharmacies goes beyond refurbishment. In our core categories, we are determined to improve the customer experience. This drives turnover. Our beauty and skincare elevation continues to drive increased turnover. We have implemented our healthcare elevation in 80 stores. This too increases turnover, which is why we will extend the healthcare elevation to an additional 50 stores by the end of this financial year. Our equity investment in ARC, a premium beauty store format targeted at the higher LSM market, is doing exceptionally well. This is positive for Clicks as the ARC Clubcard customer is our most valuable customer. The Clicks Clubcard loyalty program, with its strong affinity partners, is highly valued by our customers and is a key enabler of personalized engagement. Incredibly, we increased our loyal active Clubcard membership base to 12.1 million Clubcard members who contributed well over 81% of total sales.
Our iconic Clubcard program received an early 30th birthday present when it clinched the top spot overall as the most used loyalty program in South Africa, achieving the highest margin ever recorded in the latest Truth and Brand Map loyalty white paper. According to the loyalty white paper, loyalty programs play a significant role in combating financial strain for consumers who use loyalty programs to deal with the rising cost of living. In the past six months, our cashback rewards of ZAR 438 million certainly brought welcome relief to Clubcard customers. We are leaning into extending the convenience of our customer offering beyond store locations, engagement tools, and smart lockers. Pleasingly, we achieved app downloads of over 800,000 for the year to date. Our app shoppers contributed 33.8% of online sales. This is up 23% for the period.
We are well on track to finalize the implementation of our modern Leap pharmacy system this year. To date, we have completed the rollout to over 450 pharmacies. Turning to convenience, our store location strategy is premised on convenience and proximity to customers. In the period, we achieved a notable milestone as we celebrated the opening of our 950th Clicks store in Klerksdorp Village and our 740th pharmacy in Princess Mkabayi Mall in Vryheid. As you can see, we are on track to deliver on our medium-term target of 1,200 stores. There can be no doubt that proximity plays a huge role in cementing our position as the customer's first choice health and beauty retailer. 53% of the population reside within a -km radius of a Clicks pharmacy.
We have increased the number of primary care clinics to 216 and are enhancing our clinic offer with the support of medical aid schemes. In addition, we are trialing smaller Clicks store formats to further extend our reach. We remain focused on providing affordable, accessible healthcare. 241 of our convenient format stores are located in lower LSM areas. Currently, more than 50% of chronic scripts are enrolled on our medicine management system. We are encouraged by the progress we are making in the primary care drug therapy pilot stores, which we have extended to 17 such pilot stores. UniHealth, our 24-hour specialized pharmacy format, continues to exceed expectations. Post the integration process, we have invested in support structures to enable us to roll out the format to more sites. The learnings we gleaned from Mr.
Malik and the MChem team have been instructive, and we will open our first greenfield site in the second half of this year. That completes the review of the retail business. I will now take you through our distribution trading performance. Wholesale turnover was up 9.3%, boosted by the improved purchasing compliance from Clicks and private hospitals, the increase in the number of pharmacy openings in Clicks, and the higher demand for GLP-1 products such as Ozempic and Mounjaro. Clicks accounted for 58.3% of UPD's fine wholesale turnover, up 14.7%. Clicks's improved purchasing compliance is positive, especially given its aspirations to grow its share of retail pharmacy. Although turnover in the private hospital channel grew by 4.7% in value, volume growth by 10% was due to increased genericization in this channel. The rate of the decline in the independent pharmacy space is lessening.
The performance in Link pharmacies is improving, with purchasing compliance of the top 10 Link stores at 75% for half one. Whilst we are pleased with the improved trading performance of the UPD business, there is still room for improvement. We need to forge even closer partnerships with the private hospital groups to deliver sustained service levels and address instances of controlled supply by some pharma manufacturers in a more collaborative manner. The second area of focus is Link, where the UPD team has, in collaboration with Link owners, embarked on a drive to enhance the competitive positioning of Link. Independent acute hospitals are the final focus area. The visible improvements in turnover, which we track weekly, is due to active management. The delivery of the plans outlined above, together with seamless service to Clicks, will drive the sustained recovery of UPD's wholesale market share.
UPD's total managed turnover, which includes fine wholesale and turnover managed on behalf of bulk distribution clients, grew by 4.8% to ZAR 14.1 billion for the six-month period. We are tracking the improvements to plan in our fine wholesale channel, which, as I mentioned, is steadily improving. Value growth continues to be impacted by the higher volume growth of generics, which contributed 75% to UPD's fine wholesale sales in the period. The rationalization of our distribution portfolio has now enabled us to exit two rented DCs in December. This is positive to our expense line. We held our breath as we embarked on the upgrade of our SAP production system in September, but it went without any hitches, affirming that our team has assimilated the learnings that come from large-scale systems implementations. In February month, we also completed the Club WMS rollout at our Bloemfontein DC, once again to plan.
We took proud delivery of the 42 EV vehicles in February month. This project not only supports our environmental sustainability agenda, but our social agenda, as these vehicles are primarily used by our UPD owner drivers. That completes the review of our trading performance for the period. As always, I am inspired by the work of the people that work with us. Gordon and I are privileged to present results that are reflective of the unwavering commitment of our unbelievably proud brand ambassadors across every one of our teams. I would like to take this opportunity to both recognize and thank our people and their extended families for their individual and collective contribution to our results. This is our first set of results under the chairmanship of JJ Njeke, who has taken over the mantle of board chairman from David Nurek.
Thank you, JJ, for your gracious guidance to our executive team. I will now conclude our presentation with the outlook. During the first quarter, we kicked off with positive consumer and business sentiment. Inflationary cost pressures were easing. Our currency was improving. We experienced uninterrupted electricity supply and savored the prospect of positive economic growth. Since then, much has changed. Our view is that the consumer environment will remain constrained due to the impact of the likely VAT increase and geopolitical risks. However, we have a proven capability to trade positively through constrained trading conditions. This is because we have a strong value proposition, an extensive private label program, a loyal customer base of over 12 million Clubcard members who benefit from the most generous loyalty program in the country and broad appeal to customers, as evident in our strong market shares in core retail categories.
We also have long-term growth prospects powered by a strong balance sheet and increasing loyal customer base that now extends to Sorbet, ARC, The Body Shop, and UniHealth, a growing contribution from our private-label portfolio and a pipeline of exciting store and pharmacy locations. As noted by Gordon, we bought back shares to the value of over ZAR 372 million as part of our ongoing share buyback program. We are on track to exceed our annual new store target by opening between 45-55 new stores. To date, we have opened a total of 29 new pharmacies and are confident that we will also open up between 45-55 new pharmacies in this financial year. Our investments in ARC, Sorbet, and UniHealth not only capture the consumer across multiple brands, allowing us to affiliate that customer to Clicks, but each one is beating its original investment case.
Our engagements with The Body Shop International are positive, and we believe that product innovation that appeals to The Body Shop customer will materialize under the new owners. Scale is important, but so too is achieving efficiency without compromising service. The work in this regard has kicked off as we look to manage operating expenses to create the necessary leverage to grow profits. I am therefore pleased to report that we plan to deliver an improved earnings forecast of between 11%-16% growth in diluted headline earnings per share for this financial year. That concludes the presentation. Thank you so much for your attentive listening. At this point, I'm handing over to Sue Hemp, who will facilitate our Q&A session. Sue?
Questions from Michael DeNarbera at Javier Campo Marques. Good day. Well done on a great set of results.
The first question: the group plans to open a similar number of stores and pharmacies. How are you finding the process with the Department of Health in securing licenses, particularly in clearing the pharmacy backlog?
I'll take the first one. Thank you very much, first of all, for the kudos. I've indicated we opened 20 new pharmacies at the end of the half. To date, as I stand here with you today, we've already opened up 29. I must say we have really improved our engagement with the Department of Health and with the South African Pharmacy Council. We have actually, over the last week and a half, secured 18 additional pharmacy licenses. We are well on track, Michael. I feel very, very confident, based on what we are seeing, that we will meet that target of between 45-55 new pharmacies in this financial year.
Thanks for that. Online sales growth stood out at 23%. Did a shift in strategy via this? Could we please get your thoughts on future online plans?
It's not a shift in strategy because we've outlined the investments that we've been making over the past couple of years. We did open our dark store in Cape Town. We have refreshed our pharma app as opposed to the website version. We will refresh our pharmacy app once we've completed the rollout of our pharmacy system to all stores because there's a technical difficulty in terms of working on two systems at the same time. That should come sometime post October, November of this year. I wouldn't describe it as a shift in strategy, but part of the investments that we've been doing over the last couple of years, which has led to better customer service.
Our delivery times for the Cape Town and Johannesburg and Pretoria regions have actually halved in terms of the time that previously it took to deliver to a customer. I think that's been appreciated.
Maybe if I can add something. I think you guys have told us in the past we're a bit slow to this party. As you can see, we are catching up. We have put in place the foundational building blocks. It's our way that we do this. Importantly, what we have done is we've also internally reorganized in order for us to elevate online. I think that's probably part of what has played a role here as well.
The suppliers did not take up the SAP increase to the same extent as in prior years. Could you provide some color on what drove this change?
I think the suppliers do take up the price increase. There's always a number of suppliers that actually decrease prices because they're making a decision to take some market share. It is not something that we can comment on. There's nothing that we can do to influence it. It is something that the manufacturers decide themselves.
Question from Michael: ARC businesses, do you think you can roll out in South Africa? Also, yeah.
I presume that you're referring to the number of ARC stores. ARC is a very premium product offering, and I would expect it to be rolled out in a limited number of destination malls. There is also the possibility of looking at different formats with ARC as well. We have not exhausted the malls that we want to open yet.
What's quite good now is that when ARC was initially launched, we had to persuade landlords to open up a store, whereas now we're getting approached by landlords to open a store in their malls.
Your second question is, can you provide your current experience with Adcock as a supplier?
We don't usually comment on suppliers.
Given that it hasn't come to us and attention is a problem, then I've got nothing to comment. Yeah, we're getting stock from them. We're selling the stock. Very happy with Adcock.
Question from Tania Gensburg and Tom Rovell. You mentioned that pharmaceutical sales were up due to GLP drugs like Ozempic. Given the growing global demand for these medications, do you have any projections on how significant they could become for pharmacy sales going forward?
Look, I mean, diabetes is one of those silent killers in terms of disease states in South Africa. It is an issue. It is a national health issue that needs to be addressed. If we were to talk particularly now about GLP-1 drugs like Ozempic, the launch of Mounjaro, which is also indicated for weight loss, I think that is probably a game changer. That is probably what many people see in terms of the starlets and people that we see on TV, and we are so amazed by just how much weight they have lost. There is a growing demand for this. It is a worldwide thing. I think more and more you see clinical trials being done to see what else is impacted or affected by it. We see trials now around addiction management, for example.
I read an article the other day about a Democrat senator in the U.S., and he was talking about how much better his health is overall. Blood sugar levels are down. His hypertension is down. I think it's going to be amazing in terms of what this drug could do. Already we've seen in some territories like in the U.K., there's consideration for this actually moving on to a drug that will be part of what's available for people suffering with obesity. I think very early to say how much more this can grow in this particular country. Certainly, when you look at the year-on-year growth, I think Gordon, you and I were looking at it earlier this morning. If you look, you probably, if you start from 2023, you're probably looking 20.
We have, in the first six months of this year, sold as much in the diabetic category as we did in the whole of 2023. I think that's kind of a highlight of how to look at that. There are still opportunities. It is important, I think, that we do not deprive the true diabetic patient of what should be really a life-saving and a life-managing drug for them because of weight loss. I think it's important that both Novo Nordisk, as well as Eli Lilly, put up their weight loss drug in this market.
Got a related question from Sian Delmonteflo from Thomson Reuters. I think you've answered the first part of the question. The follow-up is, are GLP-1 medication drugs now easier to get from suppliers?
They are easier, and particularly since weight loss was really only Ozempic in the previous 12 months.
You have got Mounjaro on the market as well. Customers are selecting between the two. Mounjaro is growing very, very well for us as well.
Second question is, given the strong performance in baby and beauty, are there any plans to enhance or expand these categories, perhaps by introducing new products like Korean skincare?
Always. I think if you look at the performance of private label and exclusives, those were big drivers. I mean, in baby, private label is a massive driver. In beauty, it will be both private label and exclusive products. That is what we are really known for. We already do some of the Korean brands and as well as some Japanese brands. The private label team are constantly looking for new trends and ensuring that we bring these.
Over and above that, of course, the team in the beauty category are constantly looking at new trends, new innovations, and being sure that we bring these to market as soon as possible.
Question from Tony Curtis in the bank. He compliments us on our impressive results. He's wondering what percentage of the ZAR 1.3 billion in dividends will be paid to our shareholders abroad. I'll answer this one. Firstly, that was the past dividend. Yes. The interim dividend will be paid out in a couple of months. Our offshore percentage currently is 57%. That would be the percentage that will likely be paid out at proportion of the interim dividend.
Can we call a call out to the PIC? It's a big South African investor in our company.
This is important because, of course, the PIC really invests on behalf of the Government Employees Fund. We are always so incredibly grateful for their continued support. They will get a big chunk of that dividend that we have paid out, as well as the ongoing dividends.
Also, one of Michael Fleming's last questions. Well done on the strong profit growth. It seems the sales growth slowed on a normalized basis in the last six weeks to 7%. Has this trend continued into March or April?
Part of the reason for the slowdown was there was one less day in the six months compared to the prior year. We have been since then quite happy with our trading performance. We have not seen a further slowdown.
Can I just remind all of you, as a Scotsman, when Gordon says he's happy, you've got to understand that that's an understatement.
Sue Hemp from Peregrine Capital says, please can you provide some thoughts on Medirite as a potential competitor to Flex? Looks like they're planning to open standalone stores from existing licenses. Is this a risk for you?
We have incredible respect, first of all, for the Shoprite Checkers group. Secondly, our competitor set is incredibly broad. It is every single grocer. It is every single online trader. It's the mom-and-pop store. It's the independent pharmacy. At the moment, of course, corporates such as ourselves and another very big competitor, we have got by far the largest market shares, close to 50% between the two of us. We have seen supermarket market shares in retail pharmacy has declined over the 12-month period.
As always, we are conscious of every competitor. More than anything else, we are conscious of what it is that we have to do to truly respond to the consumer and the needs of the consumer. We believe that if we do that consistently and we do that well, we will win.
To a question from Rosa Custom of Oasis, how are you planning for the expected pressure on consumer spending following the Van Tijk hormone, particularly in discretionary product categories?
I think if you look at our pricing index compared to what we have disclosed today, we are more than 0.5% competitive to our competitors. We always look at what prices we would have to move down or up, depending on where they are in a particular price point. We do not really see that as a huge issue. We have experienced that increase before and navigated that successfully.
We have 240 more stores in the lower-income areas. What is the profitability of these stores? How do you achieve the economics of it, e.g., a reduced range offering?
Our capital allocation rules are no different for a higher-income or a lower-income store. What you do tend to find is with our lower-income stores that the sheer demand in those areas more than offsets any sort of potentially lower margin that you get from a different mix. We do not aim to do a reduced range. We look at the range across how our customers behave, and we put in appropriate ranges into stores. For example, I would probably avoid putting biltong if I am trading right next to a biltong store.
I hope that answers Jimmy from AAP's question, which is also about the moving to lower-income areas. Promotor's second question is, the PCDT pilot will be extended to 17 pharmacies. This changes the employee mix in these stores. Should we think of this as a contributor to operating margin expansion as Clicks Group has stopped?
The 17 pilot stores are in our traditional Clicks stores. We have not changed that. We would probably, as we grow the offering, especially now that medical aids are supporting it and are willing to fund the patient in respect of the service, have to say you would have to ensure that you have got the coverage in terms of the pharmacist. Importantly, I think if you could add to this your virtual doctor network, once again the patient seeing the doctor through the virtual doctor network, and then the script comes into the pharmacy, or it is for one of the classes that this pharmacist can consult and then can prescribe.
I think you just make healthcare so much more affordable and so much more accessible, remembering that we have a large sector of the population that are employed, gainfully employed, that do not have access to a medical aid scheme or medical insurance. Really, the PCDT service is able to fully support that particular customer.
Betsy David from Orwell has asked about the weight loss type 2 diabetes drug. How does Clicks see coming impact on other drugs, cardio diabetes supplements, into the future?
I think it is simply too early to tell. There are a number of clinical trials underway at the moment. I am going to leave that to those experts in that field to determine. At the moment, we do not see the doctors are fundamentally changing what they are prescribing through to patients. It is too early to assess. I would not be the one that would be assessing that.
Is it possible that the tariff developments result in Chinese products being dumped in South Africa? What impact could this have on the group?
I think you've always got to look. There's always going to be supply chain issues or either getting product. Now we're facing that we might get too much product. There's always opportunities. I think we would look at this as an opportunity if the U.S. is not going to take certain product as an opportunity for us to take in that product into South Africa. At the same time, through our private label program, we support our local manufacturers. That's something that we will continue to do because it gives us agility.
Yayish Patel from SPG says, how should one think about the group's store journey post the achievement of 1,200 Clicks stores, which is on track to be achieved over the next five years?
I'd be disappointed if we took five more years. Yayish, we are 950 at the moment. We've given you guidance in terms of the fact that we'd open up between 45-55 this year. I think kind of do the sums. I think we'd be able to do that fairly confidently. There is really no end to what we are able to achieve. If you think about the penetration of the grocers, we would be able to really be co-located wherever a grocer is located. The opportunity is still tremendous. Our market share is still below 24%. There's tremendous growth still for us in terms of our market share.
It is the work that we are doing with Discovery in terms of their FlexiCare product. That is about saying, how do we bring that 9-10 million South Africans into that medical insurance net by providing them a lower-cost alternative? It is PCDT. With PCDT, we can achieve something very, very similar. I think the future looks exceptionally bright with possibility.
Coming on to the second part of his question, he says, as a follow-up with many seeking growth at the lowest end of the market, can Clicks tend to this end of the market? Or does this part of the market rely heavily on public health facilities and therefore has limited opportunity?
The public health market, unfortunately, the facilities in public health, I mean, we have all seen the articles. It is hugely constrained.
What you find, if we reflect on COVID, 73% of people that we vaccinated during COVID were state sector patients. That gives you an idea of how that patient, when they are able to get medication or vaccinations at a public health facility, will select us actually as their preferred choice. A lot of patients at that sector, customers, will also be self-medicating, or they'll be making use of the PCDT pharmacy. I think that we've got a number of solutions that we are able to offer. When you just reflect on the COVID-19 experience, we are located where the customer is and where that customer can no longer wait at a primary public health facility. They are going to be channeled through to us.
We have had many examples where, in fact, due to overflow, the public health facilities channeled the customers proactively to their nearest Clicks store.
Another question from Promotor at Santa Barbara Dwell. In UPD, you continue to lose market share in independent pharmacy customers. Should we expect this trend to continue?
What we have tried to show is that if you look over the last three years, the decline is actually, I think, fairly arrested now. We must remember one thing. The independent pharmacy market is declining. There is consolidation taking place. The corporate sector is gaining market share. At the end of the day, UPD's exposure to the independent pharmacy customer is limited. Clicks is now over 58%. Private hospitals are about 37%. You see growth within both of those two channels. That independent pharmacy market is a declining market.
It is important for UPD to continue to ensure that Link grows as an independent pharmacy channel.
External revenue is the focus of bulk distribution contracts and hospitals. How has owning the unicorn brand assisted UPD with the continued genericization within the hospitals?
No, the focus on external revenue, of course, I mean, we have to look after the private hospitals. That is important. UPD has an 85% market share of private-listed hospitals. We will most certainly be protecting that and ensuring that our service levels are up to scratch as far as that is concerned. In terms of bulk distribution, yeah, we took brave decisions over the last two years around profitability of bulk distribution. We can see that has definitely been the right decision for our company. Our distribution part of the business is more profitable than when we had those clients.
That is important for us. The other independent hospitals are still a source of revenue, which is why we have outlined that our third area of focus is in terms of acute independent hospitals. As it regards your final question, just remember we do not manufacture. As far as the hospitals are concerned, Unicorn always used to focus on retail brands and not on hospital brands.
We do not supply Unicorn to the hospitals currently.
No.
Rosa Kassim from Oasis has another question. Given ZAR 1.7 billion in operational cash generation and ZAR 1.7 billion in cash holdings, how are you prioritizing capital allocation between buybacks, dividends, and reinvestment?
We have a dividend policy, which we continue to follow, which is a maximum of 65% of HEPS. In terms of reinvestment in the business, we will always continue to invest in the business.
You can see that in our growing CapEx investment over the last few years where we've invested in the physical infrastructure in terms of stores, in terms of DC, in terms of IT. The third part comes in with the buybacks where any excess cash we choose to return to shareholders either through buybacks or dividends. Recently, we've taken advantage of the lower share price, and we did do a buyback of ZAR 372 million.
So far, that's all the questions we've had through the webcast. If you have any more questions, please feel free to send them in via this platform or to email me directly. Thank you, everybody, for your time today.
Thank you very much, Sue, for facilitating that Q&A session. Those were really great questions. Thank you for that. That then concludes. Thank you, everyone, for dialing in today.
We appreciate that you did so.